LEY Choon Group has entered into a debt-restructuring agreement with its lenders, a move that will result in the sale of its real-estate development subsidiary for about S$11.5 million.
The agreement "provides a mechanism for the repayment of the project proceeds, as well as other amounts owed, to the lenders", the underground infrastructure services provider said in a filing to Singapore Exchange on Monday morning.
These lenders, who have existing securities over earnings from the group's ongoing projects, will release current and future project proceeds into the group's operating bank accounts subject to the terms of the agreement.
The group will repay the principal and interest owing to lenders according to a cash sweep mechanism, and will be required to make a bullet repayment. For example, it will pay a lump sum for the entirety of loan amount to the lenders on March 31, 2021, the final repayment date. The group will pay interest on the loan amount to the lenders until this final repayment date, said the release.
This move allows Ley Choon to "re-focus on our business operations, to secure more projects and to improve our profitability", said executive chairman and chief executive officer Toh Choo Huat.
Separately, Ley Choon also said it had agreed last Friday to sell its wholly owned subsidiary Ley Choon Development Pte Ltd to regional real estate developer Tee Land.
"In line with the debt restructuring plan, the group has undertaken this proposed disposal exercise," it said.
The sale, at about S$11.5 million, includes the transfer of about 8.73 million sale shares and will take place on Nov 30.
Ley Choon thus expects to receive net proceeds of about S$9.94 million. It will use the proceeds to pay off a redemption amount stated in the agreement to Sing Investments & Finance. The balance resulting from this will then be transferred to Ley Choon.
Some S$1.06 from the transfer will also be used to pay escrow agent Madison Pacific Pte Ltd.
Amendment note: An earlier version of this article stated that Ley Choon had agreed last Friday to sell Ley Choon Constructions and Engineering Pte Ltd to Tee Land. This is incorrect. It is actually selling Ley Choon Development Pte Ltd. The article above has been edited to reflect this.