Npd Dragon

Nine Dragons Paper and the 2009 Credit Crisis

Was the global credit crisis about to claim another victim?

"This time is really different. Large and small are all affected. In the past, the big waves would only wash away the sand and leave the rocks. Now the waves are so big, even some rocks are being washed away."

– Cheung Yan, Chairwoman, Nine Dragons Paper

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© 2013 Pearson Education, Inc. All rights reserved.

Nine Dragons Paper – 2009

The market waits for no one.

– Cheung Yan, Chairwoman, Nine Dragons Paper

• Publicly traded privately controlled Chinese company incorporated in Bermuda with major subsidiaries in the United States • Aggressive expansion of production capacity which has required massive amounts of capital and debt financing • Aggressive vertical integration and horizontal integration, including acquisition of assets and enterprises associated with the company’s core value chain and supporting its massive energy, water, materials, and transportation needs • Rapid sales growth while maintaining excellent margins for a company in this industry globally • Rapid capex investment has resulted in rising leverage and a continuous degradation of its credit quality to junk bond levels • Has NDP sacrificed financial stability for profit pursuit?

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© 2013 Pearson Education, Inc. All rights reserved.

NDP’s sales and profit growth had been exceedingly good … until now

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© 2013 Pearson Education, Inc. All rights reserved.

Nine Dragons sourced pulp and OCC from a variety of sources and countries, but sold its containerboard within China

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© 2013 Pearson Education, Inc. All rights reserved.

Mrs. Cheung’s appetite for growth – capital expenditures – was far beyond the company’s operating cash flow capabilities to self-fund

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© 2013 Pearson Education, Inc. All rights reserved.

NDP’s share price had been sliding continually since September 2007. The recent profit warnings and growing concerns over...