CHINA CBS INTL (00989) and the offeror, Guangze Group (Hong Kong) Limited, have jointly announced the execution of a restructuring framework agreement between Guangze Group Hong Kong and the company on July 15, 2026.

This agreement sets the stage for a proposed restructuring involving, among other steps, a share subscription and a scheme of arrangement.

Subject to the terms of the subscription agreement and contingent upon the full drawdown of HKD 39 million under a financing agreement, Guangze Group Hong Kong is obligated to subscribe for a total of 260 million subscription shares at HKD 0.15 per share for a total consideration of HKD 39 million.

The subscription price will be fully paid by utilizing all funds advanced or to be advanced by Guangze Group Hong Kong under the financing agreement, with the shares to be issued as fully paid.

Based on the company's available books, records, and information, and prior to the adjudication of admitted scheme claims, the total claims owed by the company to Guangze Group Hong Kong and Jiayi amount to approximately HKD 404 million.

Under the terms of the restructuring framework agreement, the company proposes a scheme of arrangement between itself and its scheme creditors.

Upon the scheme becoming effective, all claims from scheme creditors will be fully released and discharged.

In return, scheme creditors holding admitted claims will be entitled to receive scheme shares allotted and issued by the company to the scheme company, which will hold these shares in trust for the benefit of those creditors.

These shares will only be distributed to the relevant creditors following the adjudication of their admitted claims and after the closure of the offer.

Pursuant to the scheme, the scheme company will be allotted and issued approximately 4.742 billion scheme shares.

The scheme company will hold these shares in trust for the creditors until their claims are adjudicated and the irrevocable undertaking offer concludes.

The price per scheme share is HKD 0.15, representing a discount of approximately 79.17% compared to the closing price of HKD 0.72 per share on the Hong Kong Stock Exchange on the last trading day.

Assuming the full HKD 39 million under the financing agreement is drawn down and with no other changes to the issued share capital between the date of this announcement and completion (excluding the allotment of subscription and scheme shares), the shareholdings of Guangze Group Hong Kong and Jiayi would increase to approximately 2.223 billion shares and 818 million shares, respectively.

This would represent about 41.46% and 15.26% of the enlarged issued share capital, respectively.

Consequently, the total shareholding interest of the concert party group would rise from approximately 109 million shares, representing about 30.20% of the issued share capital as of the announcement date, to roughly 3.06 billion shares, accounting for about 57.07% of the enlarged issued share capital.

This triggers a mandatory unconditional cash offer at HKD 0.15 per share for the remaining approximately 251 million public shares, involving a total consideration of about HKD 37.7 million.

The company is facing severe liquidity shortages and significant financial pressure, which has seriously impaired its ability to repay all due debts, and it lacks sufficient financial resources to meet its due liabilities.

Given Guangze Group Hong Kong's willingness to provide funding to alleviate the company's debt and support its business operations, the directors believe entering into the restructuring framework agreement and subscription agreement will facilitate the group's debt restructuring and is beneficial for implementing its debt restructuring plan.

Furthermore, the company views the proposed restructuring as a strategic and practical solution for the orderly resolution of its outstanding debts.

It will allow for all debts and liabilities owed by the company to its creditors to be discharged and settled under the scheme's terms.

Otherwise, the company would face an unsustainable financial position and the risk of insolvent liquidation, likely resulting in significantly lower or negligible expected returns for shareholders and scheme creditors.