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8Telecom proposes issuing S$10m equity-linked convertible notes

8TELECOM International Holdings has entered into a binding term sheet to issue 3 per cent equity-linked convertible notes worth up to S$10 million maturing in 2021.

The mainboard-listed telecommunication infrastructure solution provider announced on Sept 22 that it had inked a term sheet with subscriber Lok Group a day before, with the objective of finalising and entering into a subscription agreement for the proposed issue of the equity-linked convertible notes.

The company with property development business in China said the equity-linked convertible notes would be issued in four tranches of S$2.5 million each, and each tranche comprises 10 sub-tranches of S$250,000 each.

8Telecom's board said it had explored various alternative sources of financing possibilities but was unable to obtain any alternative financing in view of the company's current financial position and performance. Thus, the proposed notes issues "is in the best interest of the company and its shareholders" as it will ensure the ability of 8Telecom to continue to operate as a going concern.

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Proceeds of the notes are to be used for working capital and "possible new business opportunities".

The interest of 3 per cent per annum is payable if the notes is issued and not converted, with the first payment to be made on Dec 31, 2020, 8Telecom said in the regulatory filing.

Lok Group will subscribe for the first three sub-tranches of the Tranche 1 Notes being S$750,000 on the fifth business day immediately after the last of the conditions precedent set out in the subscription agreement are fulfilled or such other date as the parties may agree.

The conversion price shall be 80 per cent of the average closing price per share on any three consecutive business days on which shares were traded on the Singapore Exchange as selected by the relevant noteholder during the 45 business days immediately preceding the relevant conversion date.

8Telecom shall have the sole discretion to call upon subsequent tranches of the notes at any time from and including the completion of conversion of the preceding tranches to and including the 10th business day thereafter. Also, Lok Group shall have the discretion to call upon subsequent multiple sub-tranches of the notes notwithstanding that all the preceding sub-tranches notes have not been fully converted.

The company intends to obtain shareholders' approval for the proposed notes issue, and a circular containing the notice of the extraordinary general meeting will be sent to shareholders.

The Singapore Exchange had on Feb 10 rejected 8Telecom’s applications to issue new shares for various purposes, including payment to vendors for its acquisition of a 51 per cent stake in China Commodity Market and China Commodity Centre.

8Telecom had requested trading suspension of its shares with immediate effect after market closed on Sept 6, converting from a trading halt imposed a day earlier. The reason for the suspension is that it is now a cash company.