Sino Agro Food Inc (fka SIAF)

[RealDutch]

The process of settling debt with stock

Since no-one else will have a shot at this, I will give it another try.

JV-partners pay for development costs of new projects. SIAF get paid well for design/construction. They use the profits to purchase a 75% stake (they own 25% initially when construction is completed with the JV partner owning 75%). A lot of the time, the profits from services is tied up so they can repurchase 50% resulting in a 75% stake.

But new projects require startup capital. To buy inventory and pay for salaries when the JV isn't profitable yet. A lot of money is needed. SIAF and the JV-partner usually share these costs. But SIAF doesn't pay them with money, they give the JV-partner stock for debt settlement instead. The JV-partners are not allowed to sell the stock until the debt is at least six months old. Then, they will usually sell it becaused they have invested so much already (we're talking about $10M here).

So, the good part is, SIAF can grow very fast. The bad part is, IT'S KILLING US.