Section 1 Necessity of Issuing Securities and Choosing the Type of Securities
Huabei Technology Co., Ltd. (hereinafter referred to as "the Company" or "the Company") intends to raise funds by issuing convertible corporate bonds to unspecified targets (hereinafter referred to as "this Issuance"; convertible corporate bonds hereinafter referred to as "convertible bonds") to further expand its production and operation scale, enhance its core competitiveness, and achieve sustainable healthy development. This is in accordance with the Company's situation and relevant laws and regulations, including the "Company Law of the People's Republic of China" (hereinafter referred to as "Company Law"), the "Securities Law of the People's Republic of China" (hereinafter referred to as "Securities Law"), and the "Administrative Measures for the Registration of Securities Issuances by Listed Companies" (hereinafter referred to as "Administrative Measures").
Unless otherwise specified in this analysis report, the terms used herein have the same meaning as in the "Proposal of Huabei Technology Co., Ltd. for Issuing Convertible Corporate Bonds to Unspecified Targets."
I. Type of Securities to Be Issued
The securities to be issued in this offering are convertible corporate bonds that can be converted into A-share stocks of the Company. These convertible corporate bonds and the Company's stocks to be converted from them will be listed on the Shenzhen Stock Exchange.
II. Necessity of Choosing the Type of Securities
(I) This Issuance Meets the Needs of the Company's Business Development
The projects to be funded by the proceeds from this issuance of convertible corporate bonds to unspecified targets align with national development strategies and the development trends of the automotive parts and intelligent manufacturing industries. This issuance is a crucial measure for optimizing and upgrading the Company's "intelligent manufacturing" business, expanding production capacity, and strengthening core business competitiveness, which will enhance the Company's sustainable development capability and risk resistance. The projects are in the interest of the Company and all its shareholders, thus demonstrating the necessity and feasibility of the fundraising projects.
Given the large scale and long construction period of the investment projects funded by the proceeds, using the Company's own funds or debt financing for these investments could create significant financial pressure. Therefore, by issuing convertible bonds for external financing, the Company can meet the investment needs of the fundraising projects while retaining sufficient funds for future daily operations.
(II) Limitations of Bank Loan Financing
The scale of financing through bank loans and other debt financing methods is relatively limited, and the financing costs are relatively high. Relying solely on debt financing to meet the funding needs of the fundraising projects would lead to an increase in the Company's asset-liability ratio, thereby increasing financial risks. High interest expenses would adversely affect the Company's profitability, increase operating risks, and hinder the Company's long-term stable development.
(III) Issuing Convertible Corporate Bonds is the Optimal Financing Method for the Company at Present
Convertible corporate bonds can be converted into company shares under certain conditions, thus possessing characteristics of both equity and debt financing. They typically have a lower coupon rate, resulting in lower financing costs. The Company's decision to issue convertible corporate bonds to meet the funding needs of its fundraising projects will optimize its capital structure, reduce financing costs, enhance shareholder returns, and align with the Company's long-term stable development needs, demonstrating its necessity.
In summary, the issuance of convertible corporate bonds to unspecified targets is necessary.