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United States securities and exchange commission logo
January 5, 2022
Yongchen Lu
Chief Executive Officer
TH International Limited
2501 Central Plaza
227 Huangpi North Road
Shanghai, People s Republic of China, 200003
Re: TH International
Limited
Amendment No. 1 to
Registration Statement on Form F-4
Filed December 2,
2021
File No. 333-259743
Dear Mr. Lu:
We have reviewed your registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by amending your registration
statement and providing the
requested information. If you do not believe our comments apply to your
facts and
circumstances or do not believe an amendment is appropriate, please tell
us why in your
response.
After reviewing any amendment to your registration statement and
the information you
provide in response to these comments, we may have additional comments.
Amendment No. 1 to Registration Statement on Form F-4 filed December 2,
2021
Prospectus Cover Page
1. Please disclose whether
your auditor is subject to the determinations announced by the
PCAOB on December 16,
2021 and whether and how the Holding Foreign Companies
Accountable Act and
related regulations will affect your company.
Summary, page 1
2. Reference is made to
your disclosure of adjusted store EBITDA on page 2 and elsewhere
in the filing.
Throughout your filing, when referencing adjusted store EBITDA, please
disclose in equal or
greater prominence a fully-burdened gross profit prepared in
accordance with GAAP.
Refer to Item 10(e)(1)(i)(A) of Regulation S-K.
Yongchen Lu
FirstName LastNameYongchen Lu
TH International Limited
Comapany
January NameTH International Limited
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3. We note your response to comment 4, as well as your amended disclosure
in the
"Corporate Structure" sub-section. In addition:
Please revise your disclosure to state that this is the
post-business combination
corporate structure and not THIL's current corporate structure as
of the date of the
proxy statement/prospectus. In this regard, we note your
disclosure that the "diagram
illustrates THIL s corporate structure as of the date of [the]
proxy
statement/prospectus," but the diagram includes the post-business
combination
structure, as it includes the separate interests of the sponsor
and Silver Crest public
shareholders.
Please revise your diagram to also include the contractual
arrangement
between Hortons (China) Holdings Co., Ltd. and Pangaea Data Tech
(Shanghai) Co.,
Ltd. ("DataCo"). In connection therewith, please describe the
relevant Business
Cooperation Agreement, as you do on pages 125 and 126 of the
proxy
statement/prospectus. Please also discuss any uncertainties
regarding such
arrangement, as we note your disclosure on page 34 that you do
not expect to "be
subject to . . . cybersecurity review or reporting requirements .
.. . because [you] will
not collect, store, or process more than one million users
following the anticipated
transfer of control and possession of [y]our customer data to
DataCo."
4. We note your response to comment 5, as well as your amended disclosure
throughout the
risk factors, and we re-issue the comment. In this summary section,
please summarize
your analysis of the applicability of the permission and/or approval
requirements from the
CSRC, CAC or any other entity that is required to approve of THIL s
operations.
Please state affirmatively whether THIL has received all requisite
permissions and
whether any permissions have been denied, and include in such
discussion the approvals
discussed on page 30.
5. We note your response to comment 6, as well as your amended disclosure
that "THHK
has transferred an aggregate of US$117.0 million in cash to Tim
Hortons (China)
Holdings Co., Ltd. ( Tim Hortons China ) and Tim Hortons
(Shanghai) Food and
Beverage Co., Ltd. as capital injections." In addition to including
such aggregate amount,
please quantify the amount that has been transferred to each of Tim
Hortons China
and Tim Hortons (Shanghai) Food and Beverage Co., Ltd. Please also
quantify any
dividends and capital expenses that have been paid, or state that none
have been paid.
6. We note your response to comment 9, as well as your amended disclosure
that "THIL s
auditor is currently not, and has not been, subject to inspections by
the PCAOB." Please
revise your statement in appropriate places to clarify that the PCAOB
has been and
currently is unable to inspect your auditor (emphasis added). Please
also disclose whether
your auditor is subject to the determination announced by the PCAOB on
December 16,
2021. Additionally, in your risk factor beginning on page 45, please
update your
disclosure to reflect that the Commission adopted rules to implement
the HFCAA and
that, pursuant to the HFCAA, the PCAOB has issued its report notifying
the Commission
Yongchen Lu
TH International Limited
January 5, 2022
Page 3
of its determination that it is unable to inspect or investigate
completely accounting firms
headquartered in mainland China or Hong Kong. In this regard, we note
that your
disclosure references the rules adopted on March 24, 2021 as the
latest update regarding
the Holding Foreign Companies Accountable Act. Finally, please state
in your risk factor
discussion of the Accelerating Holding Foreign Companies Accountable
Act that, if the
Act is enacted and the number of non-inspection years is decreased
from three years to
two years, the time before your securities may be prohibited from
trading or delisting
would be reduced.
Summary Risk Factors, page 14
7. We note your revisions in response to comment 8. Please further revise
to clarify that the
Chinese government's exertion of more control over offerings conducted
overseas and/or
foreign investment in China-based issuers could result in a material
change in THIL's
operations and/or the value of THIL's common stock.
Summary Consolidated Financial Information of THIL
Non-GAAP Financial Measure, page 18
8. We read your response to our comment 10 and note your revised
disclosure. Since this
adjustment has the effect of accelerating revenue recognition for
purposes of the non-
GAAP measure, it does not comply with Rule 100(b) of Regulation G.
Please revise your
disclosure accordingly.
9. We reviewed your response and revisions in response to comment 11. It
appears that a
fully-burdened gross profit is the most comparable GAAP measure to
Adjusted Store
EBITDA. When reconciling to this non-GAAP measure throughout your
filing, please
reconcile from a fully-burdened gross profit.
10. Reference is made to the non-cash rental adjustment. By making this
adjustment you
appear to be substituting an individually tailored recognition and
measurement method to
record cash paid for rentals instead of GAAP rent expense which appears
to be prohibited
by Question 100.04 of the Staff s Compliance and Disclosure
Interpretations on Non-
GAAP Financial Measures. Accordingly, please tell us why your
presentation isn't
prohibited
FirstName or revise to remove
LastNameYongchen Lu this adjustment.
Comapany
11. NameTH
Please explainInternational
the input VATLimited
refund adjustment to us in detail and
explain why the
Januaryadjustment is not
5, 2022 Page 3 prohibited.
FirstName LastName
Yongchen Lu
FirstName LastNameYongchen Lu
TH International Limited
Comapany
January NameTH International Limited
5, 2022
January
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Risk Factors
"Silver Crest's shareholders will have a reduced ownership and voting interest
after
consummation of the Business Combination . . . .", page 57
12. We note your response to comment 15, as well as your amended
disclosure. We reissue
the comment in-part. In particular, please:
Revise your disclosure to note that such scenario includes the
1,400,000 earn-in
shares to be held by the sponsor, if true, in addition to your
statement that you are
including the 14,000,000 earn-out shares to potentially be issued
to existing THIL
shareholders.
In this regard, we note that if the combined company does not
meet the share closing
price conditions discussed on page 159 and 160, then the existing
THIL shareholders
would not earn 14 million shares but the sponsor would only
forfeit 1.4 million
shares. As a result, the sponsor's ownership percentage in the
combined company
would be greater than the interests held by the existing THIL
shareholders, in the
event in which the target price conditions are not met. To
provide investors with this
context, please disclose the corresponding potential ownership
interests in this
scenario for each of the existing THIL shareholders, the existing
Silver Crest
shareholders (excluding the sponsor), and the sponsor.
Separate the interests held by the Silver Crest public
shareholders from the sponsor
when discussing the ownership of the combined company throughout
the prospectus.
In this regard, we note that the ownership table on page 160
presents their ownership
on a combined basis.
Regarding the table on page 160, provide the ownership
interests of each of the Silver
Crest public shareholders, the sponsor and the existing THIL
shareholders when
including the earn-out shares and the shares underling both the
options, restricted
share units and warrants. Provide such ownership interests in the
chart on page xvi as
well.
Yongchen Lu
FirstName LastNameYongchen Lu
TH International Limited
Comapany
January NameTH International Limited
5, 2022
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"Pangaea Two Acquisition Holdings XXIIB Limited, an existing shareholder of
THIL, will have
over 50% equity interest . . . ", page 58
13. We note your response to comment 16, as well as your new risk factor.
In particular,
please:
Revise your heading to identify Peter Yu, the Chairman and
Managing Partner of
Cartesian, instead of Pangea Two Acquisition Holdings XXIIB
Limited, which we
note is the entity that holds the separate equity interests of
Cartesian, Tencent,
Sequoia China and Eastern Bell.
Provide the percentage of shares that would need to be redeemed
by Silver Crest
public shareholders to trigger the 50% control threshold. In this
regard, we note that
you refer to a scenario of "maximum redemption" in your heading.
As Peter Yu will
own 53.6% of the outstanding shares of the combined company
assuming maximum
redemption, we note that he will still have a majority control at
certain redemption
percentage below a maximum redemption scenario.
Prominently state Peter Yu's potential majority ownership in
the beginning of your
risk factor discussion instead of at the end, and include both
the redemption
percentage noted above as well as the control percentage assuming
no redemptions,
to provide investors context regarding the range of ownership
scenarios.
Here and on the prospectus cover page, describe that through
Peter Yu's potential
majority ownership of your company, he would have the ability to
control the
outcome of matters submitted to stockholders for approval,
including the appointment
or removal of directors.
Redemption Rights, page 74
14. We note your response to comment 44, as well as your amended
disclosure. Additionally,
please:
Explain why existing Silver Crest shareholders will still own
3,994,184 shares of the
combined company in the scenario on page 73, assuming maximum
redemptions,
given that this scenario assumes that public stockholders
exercise their redemption
rights with respect to all outstanding shares.
Revise your chart on page 74 to include the breakdown of the
amount of shares and
corresponding percentage to be held by each of the existing
Silver Crest shareholders,
the sponsor and existing THIL shareholders, once you take into
account the impact of
of each of the identified potential sources of dilution.
Provide narrative disclosure explaining the resulting risks to
non-redeeming
shareholders in the event that redeeming shareholders exercise
their retained
Yongchen Lu
TH International Limited
January 5, 2022
Page 6
public warrants, which we note you quantify to be $6,274,500 as
of December 1,
2021.
Provide narrative disclosure explaining why the per share value
of THIL ordinary
shares continues to be $10.00 per share in each of the redemption
scenarios, as you
note in footnote 7 to the table on page 73 and footnote 3 to the
table on page 74.
Revise your chart on page 74 to state that the "Total THIL
Ordinary Shares
outstanding at Closing" includes the shares underlying granted
option shares and
restricted shares, in addition to the earn-out shares and shares
underlying the
warrants.
Background of the Business Combination, page 86
15. We note your response to comment 17, as well as your amended
disclosure that "each of
UBS and BofA Securities will be paid a fee equal to a certain
percentage of the aggregate
gross proceeds received by THIL in any PIPE transaction." Please
disclose the percentage
that UBS will be entitled to upon the closing of any PIPE transaction.
Additionally,
please quantify the fees payable to UBS in connection with its
services provided as capital
markets advisor to Silver Crest in the proposed business combination.
Last, similar to
your discussion of a "hypothetical $100,000,000 PIPE financing" on
page 57, please
quantify the quantify the aggregate fees payable to UBS Securities
LLC, including the
capital markets advisory fee, the fee in connection with such
hypothetical PIPE, and the
deferred fee of $12,075,000s, as discussed on page xvi.
16. We note your response to comment 18, as well as your amended
disclosure discussing the
financial due diligence conducted by FTI Consulting (Hong Kong) in
greater detail. We
reissue the comment in-part. Please tell us whether FTI Consulting,
UBS, BoFA or any
other advisors delivered any reports to the board or potential PIPE
investors that were
materially related to the transaction and whether these would fall
within the purview of
Item 4(b) of Form F-4 (including the investor presentation circulated
by Bank of America
to THIL and UBS). In this regard, we note that the Item 4(b) requires
disclosure of
reports under Item 1015 of Regulation M-A and is distinct from your
response to
comment 45, which discusses your reliance of Section 4(a)(2) of the
Securities Act.
17. We note your response to comment 20, as well as your amended disclosure
that the
"Sponsor agreed to donate 1,500,000 of its THIL Warrants . . . ." Please
explain how this
is permitted under the Sponsor Lock-Up Agreement, as we note your
disclosure on page
98 that such agreement and the corresponding lock-up periods apply to
transfers of
FirstName LastNameYongchen Lu
"Sponsor Locked-Up Shares," including warrants held by the Sponsor.
Additionally,
Comapany NameTH
please International
briefly discuss Limitedtax treatment of such donation or
tell us why this is not
the intended
Januarymaterial.
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FirstName LastName
Yongchen Lu
FirstName LastNameYongchen Lu
TH International Limited
Comapany
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5, 2022
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18. We note your response to comment 21, as well as your amended
disclosure, and we
reissue the comment in-part. In particular:
We note your disclosure that "representatives of THIL had
originally requested" the
permitted equity financing to "be capped at an amount equal to
10% the total
outstanding voting securities of THIL" and that Silver Crest and
THIL "agreed on the
amount of the Permitted Financing" on a call on August 13, 2021.
Please disclose the
agreed-upon amount, which we note is $30,000,000 according to the
page A-8 of
Annex A, and explain how the parties determined such amount.
Please explain how the parties determined the price milestones
related to the earn-
out/earn-in structure and the corresponding 5-year time period,
as well as the terms of
the minimum available cash condition and calculation thereto
(including the
determination of the $100,000,000 threshold with respect to any
potential PIPE
financing).
Unaudited Prospective Financial Information of THIL, page 92
19. We note your response to comment 27, as well as your amended
disclosure stating that
Silver Crest's board of directors considered "the analyses contained
in the Investor
Presentation dated June 2021 prepared by Silver Crest, a copy of which
was filed . . . ."
We reissue the comment in-part. Please include the analyses and
related discussion of
such analyses in the proxy statement/prospectus, including in
particular the analyses of
THIL against "comparable high-growth foodservice and retail/consumer
products
companies," as you discuss on page 86.
20. We note your response to comment 28, as well as your amended
disclosure that the "five-
year period is consistent with the forecasts that THIL has been
preparing for its
management in the past." We re-issue the comment in-part. Please
explain how and why
THIL's management selected a "five-year period" for its forecasts
other than the reason
that this is a consistent practice. Additionally, please include
narrative disclosure with
respect to such risks that you cross-reference, including a discussion
of whether such high
and sustained growth may be unrealistic and may have resulted in
inflated valuation
conclusions.
Yongchen Lu
FirstName LastNameYongchen Lu
TH International Limited
Comapany
January NameTH International Limited
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Interests of Certain Persons in the Business Combination, page 95
21. We note your response to comment 29, as well as your amended
disclosure. Please
quantify the value of the sponsor's ownership interest in THIL
assuming the completion of
the business combination and based on the transaction value of the
business combination
as compared to the price paid by sponsor for its ownership interest in
Silver Crest. Please
also revise your discussion of the corporate opportunities waiver to
note that such waiver
is ongoing, to ensure consistency with your disclosure that such
officers and directors
continue to "not be obligated to bring all corporate opportunities,"
as you discuss on page
xiv and 12. Please make conforming changes throughout the proxy
statement/prospectus
in appropriate places.
22. We note your response to comment 30, as well as your amended
disclosure that "certain
directors and executive officers own THIL Ordinary Shares . . . " and
"are expected to
become directors and/or executive officers of the combined company . .
.. ." Please also
disclose THIL's nomination right with respect to the board of
directors of the combined
company, as you discuss on page 161.
Comparison of Rights of THIL Shareholders and Silver Crest Shareholders, page
208
23. We note your disclosure that, under the THIL Articles, "[o]ther than
Silver Crest
Management LLC s right to designate one director pursuant to the
Merger Agreement,
shareholders do not have any nomination rights." We also note your
disclosure on page
58 that "Silver Crest, Tencent Mobility Limited, SCC Growth VI Holdco
D, Ltd. and Tim
Hortons Restaurants International GmbH have entered into written
agreements with THIL
that grant each of them the right to nominate or appoint, in the
aggregate, four directors to
the Board after the Closing, provided that certain conditions are met
.. . . ." Please discuss
such nomination rights in this section in accordance with Item 4(a)(3)
of Form F-4.
Legal Matters, page 220
24. Pleases state that Han Kun Law Offices will be passing upon certain
matters relating to
PRC law. In this regard, we note your disclosure on page II-2
indicates that you intend to
file their opinion and consent in a future amendment, and you rely on
their opinion in
certain instances in the proxy statement/prospectus.
Yongchen Lu
FirstName LastNameYongchen Lu
TH International Limited
Comapany
January NameTH International Limited
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Item 21. Exhibits and Financial Statements Schedules, page II-2
25. We note your disclosure that "[i]t is intended that the Business
Combination qualify as a
"reorganization" within the meaning of Section 368(a) of the Code" on
pages xi, 64 and
182, as well as your related disclosure that "a U.S. Holder of Silver
Crest Securities
generally would recognize gain or loss in an amount equal to the
difference . . . " if the
business combination does not qualify as a reorganization. In light of
your discussion that
such tax consequences are material to investors, please file a tax
opinion as Exhibit 8 to
the registration statement. Refer to Item 601(b)(8) of Regulation S-K
and Section III.A.2
of Staff Legal Bulletin 19.
General
26. We note your response to comment 46, as well as your amended
disclosure, and we
reissue the comment in-part. To the extent that you are providing data
about a certain
metric to investors, please define the metric. In this regard, we note
your disclosure on
page 118 that members "who are relatively active on average spend
approximately 20%
more at [y]our stores one year after joining the program." Please
explain what you mean
by loyalty program members "who are relatively active" as well as
members who are "less
active," which you discuss on page 126.
27. In appropriate places, including in the Risk Factors section, please
expand your disclosure
to discuss the issues, risks and impacts or potential impacts on your
business associated
with current global supply chain problems, labor shortages and
inflation.
28. We note your response to comment 2. Please revise to state that the
Silver Crest units and
public warrants will be delisted and deregistered. Please also include
this disclosure on
the prospectus cover page.
Yongchen Lu
FirstName LastNameYongchen Lu
TH International Limited
Comapany
January NameTH International Limited
5, 2022
January
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We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
Refer to Rules 460 and 461 regarding requests for acceleration. Please
allow adequate
time for us to review any amendment prior to the requested effective date of
the registration
statement.
You may contact Tatanisha Meadows at 202-551-3322 or Adam Phippen at
202-551-
3336 if you have questions regarding comments on the financial statements and
related
matters. Please contact Brian Fetterolf at 202-551-6613 or Lilyanna Peyser at
202-551-3222
with any other questions.
Sincerely,
Division of
Corporation Finance
Office of Trade &
Services
cc: John Owen