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RAPAPORT...
Kingold Jewelry Inc. entered into a convertible note purchase agreement with a majority-owned subsidiary of Fosun International Limited that will result in proceeds of $15 million when the transaction closes. The proceeds will be used to accelerate the construction of the Kingold Jewelry Cultural Industry Park, according to the firm. Kingold agreed to issue and sell a $15 million aggregate principal amount of a 6 percent senior-secured convertible note due 2018, while Fosun will have the right to convert the principal amount into shares of common stock at an initial conversion price of approximately $1.15 per share. The note was secured by a letter of credit from a bank and a personal guarantee by Kingold's chairman and CEO, Zhihong Jia. Jia said, "This is a significant investment and important step in Kingold's corporate development. We believe that aligning our interests with a globally known and respected financing partner such as Fosun will broaden Kingold's capabilities as well as potentially change the landscape of China's gold jewelry market. Both sides conducted considerable due diligence to reach this agreement and we are excited about the long-term upside from our two companies working together. Fosun owns Zhaoyuan Gold, one of the largest gold-mining companies in China, and Yuyuan Group, one of the largest gold retailers in China. We believe there is a tremendous opportunity in the creation of a vertically integrated conglomerate of gold mining, designing, processing and retailing in China. With Fosun's strong support and resources, Kingold has a great opportunity to accomplish lateral consolidation across a very fragmented gold manufacturing industry in China and become a solid market leader." In conjunction with the purchase agreement, Kingold will add two additional seats to its board of directors upon closing the transaction. The two new board members will be XiaoFeng Lu, the executive general manager of Fosun, and Min Zhou, the vice president of Shanghai Yuyan Jewelry Ltd.
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