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JTC makes early-buyback offer for Jurong Country Club notes

But it draws noteholders' ire by offering S$35,800 less than par value

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JTC Corporation has agreed to buy back some S$23.5 million worth of debentures from noteholders, who are also Jurong Country Club (JCC) members, 17 years ahead of the maturity date - but at a discount.


JTC Corporation has agreed to buy back some S$23.5 million worth of debentures from noteholders, who are also Jurong Country Club (JCC) members, 17 years ahead of the maturity date - but at a discount.

In an offer letter seen by The Business Times, which was sent out to all 196 JCC debenture holders, JTC said it is offering each person S$84,200.

The notes - which are due in September 2033 - were issued at the par value of S$120,000 in 1993, when the club was raising funds to refurbish its facilities.

The notes came in a package with a membership, costing S$150,000 altogether - which implicitly suggests that the membership cost S$30,000.

The early redemption now stems from the fact that the land on which JCC sits will soon be taken back by the government for the building of the Singapore terminus of the Singapore-Kuala Lumpur High Speed Rail.

JTC said that it had arrived at the purchase price of S$84,200 after engaging KPMG Services to determine a range of offer prices for its voluntary buyback.

In its letter, JTC also provided details of its methodology, revealing that KPMG had used the discounted cash flow method to estimate the present value of the amount to be received in September 2033. KPMG had used statutory boards' and Singapore government securities' zero-coupon rates as the discount rates.

JTC added that noteholders have a choice to monetise their notes now, or continue to hold them until the redemption date in 2033. Nothing in the offer will change the conditions in the notes.

But this failed to appease the Debenture Note Working Committee (DNWC).

When contacted, DNWC chairman Lim Hung Siang said in an email response: "The Debenture Note Working Committee is deeply disappointed with the JTC repurchase offer, which we feel is unfair and has not addressed the facts in the claim raised by the DNWC. (These claims were also published in a letter to the editor in BT on Aug 4.) The DNWC will be meeting our lawyer to discuss the matter further."

In his earlier letter, Mr Lim (who was group business development and special projects officer at ComfortDelGro before he retired) had said: "JTC needs to understand that the 2003 JTC note is an interest-free loan and is not an investment product which generates a yield and can be freely traded like JTC corporate bonds.

"The subscription of the JTC notes was conditional upon a subscription of a JCC membership in 1993 and these notes cannot be freely traded in themselves, unless sold together with the JCC membership. The notes are, in substance, debts owed and guaranteed by JTC to the noteholders that must be repaid in full."

He added that noteholders are merely asking for the redemption of the notes at par when the club closes this year. "We believe our request is fair and not at all unreasonable."

Checks show that JCC memberships were trading in the open market at around S$100,000 in 1993, making a S$30,000 membership a good deal. Even after paying a transfer fee to the club, members would have pocketed a good profit had they sold their membership in the mid-1990s.

In response to noteholders' unhappiness, a JTC spokesman said on Thursday evening: "We understand that some noteholders may not want to hold the notes till maturity in 2033 and want to sell the notes before that. As such, we have decided to provide noteholders with an option to do so by making a repurchase offer that is consistent with market practice.

"In arriving at the offer price, we have engaged KPMG to advise us on what would be the market practice for such a repurchase. For noteholders who wish to hold on to the notes, we continue to honour our obligation to redeem the notes at their maturity in 2033."

The offer expires at 5pm on Sept 23, which is also by when acceptance forms must be submitted. JTC will hold a briefing next Thursday at its Jurong office to address noteholders' questions on the offer.

Weighing in on the case, Ch'ng Li-Ling, partner at RHTLaw Taylor Wessing, said: "This is indeed a human interest story, with the funds of members who are retirees being tied up in the notes. Without the benefit of the notes documents, it is futile to speculate on which party is right. If the matter goes to court, the court will review the terms and conditions of the notes."

Henry Heng, a partner at Kennedys Legal Solutions, added: "Given that JTC is considering an earlier redemption of the bonds, parties should perhaps consider alternative dispute resolution, such as mediation, to explore an amicable resolution of the matter."