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BELEAGUERED flooring firm Jason Holdings on Wednesday said that it has signed a binding conditional term sheet with its director and controlling shareholder Lim Chwee Kim to issue to him two billion new shares to raise S$1 million.
These placement shares represent about 73.28 per cent of the enlarged share capital of the company.
The issue price of S$0.0005 per share is a discount of about 99.2 per cent to the volume weighted average price of the shares of S$0.062 based on trades done on Jan 5, 2016 - the last full market day before the placement term sheet was signed. The stock has not traded since.
The discount exceeds the 10 per cent discount limit under Catalist rules, so the company will be seeking approval of its shareholders for the placement at an extraordinary general meeting.
Jason Holdings said: "Based on the current financial status of the company, the company is practically insolvent as its aggregate liabilities (including contingent liabilities) exceed its total assets. The company requires funds in order to carry out the scheme and restructure its debts and liabilities."
It plans to use proceeds to pay professional fees for this placement and the scheme, and to fund the company's working capital to facilitate the restructuring, as well as compromise all claims against the company pursuant to the scheme.
It added that since there are no bank facilities available to the group, the working capital available is not sufficient to meet its needs. Even with the placement proceeds, the working capital still will not be enough.
Despite that, the company said that "the board is of the view that the proposed placement is crucial in the restructuring of the company's debts and liabilities, and in keeping the possibility of the company executing any future business or restructuring plans".