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DeClout: Collateral, guarantee, change of control terms not unusual in S$10m loan
CATALIST-listed technology firm DeClout on Tuesday said that a S$10 million two-year loan it took from six private investors was the "best available financing option", and that the pledged assets and guarantees under the loan are not unusual for such transactions.
A group of minority shareholders had criticised the loan as entrenching founder Vesmond Wong's position in the company, since the debt may be accelerated if Mr Wong and one executive lose control of the company. DeClout's 47 per cent stake in Singapore-listed Procurri was also pledged for the loan.
The Singapore Exchange (SGX) asked DeClout in a query to explain why the loan is in the best interest of the company and minority shareholders.
DeClout replied that it is not unusual for lenders in loan transactions to impose financial covenants, require security, impose change in control provisions, or require lenders' consent for material transactions.
"For any uncommitted facilities, lenders usually have the right to review the facilities at their discretion. In contrast, the company has managed to secure the S$10 million loan, which is a committed facility," DeClout said.
It added that the loan will help to finance the business expansion of subsidiaries Beaqon and vCargo Cloud (VCC).
In its filing to the SGX, DeClout also said that it had reached out to various financial institutions and individuals to explore fund raising via the secondary capital market. These include discussions with financial institutions for proposed loan and convertible loan financing, as well as discussions with individuals for a straight loan using the Procurri shares as collateral.
The tech firm added that it owes confidentiality obligations to Xandar Capital not to disclose information furnished by it, including information on its lenders in the loan agreement, unless consent is granted by Xandar Capital, which introduced the lenders to DeClout.
Separately, DeClout disputed claims made in a BT forum letter, including that the loan "not only carry a pledge over all shares of Procurri but the entire assets of DeClout", and that "Procurri makes up over 70 per cent of DeClout's net tangible assets".
DeClout clarified that the loan is secured by the Procurri shares, with guarantees provided by Beaqon and VCC. It noted that Procurri makes up 36 per cent of the net tangible assets attributable to owners of DeClout, and that it has other substantial tangible assets besides Procurri.
DeClout said the current pledge value of the Procurri shares stands at S$23.4 million as at end December last year.
Based on the firm's audited results for fiscal 2017, net tangible assets attributable to owners of DeClout is S$65.4 million, and the firm has a gearing ratio of 43 per cent, DeClout said.
According to DeClout, the entire board, including its independent directors, have approved the loan agreement.
Last week, DeClout subsidiary vCargo Cloud bought a stake in Indonesia firm Gatotkaca Trans Systemindo (GTS) for US$850,000. It also plans to extend GTS a loan of US$545,000.
DeClout said legal due diligence was conducted on GTS in its filing to the Singapore bourse on Tuesday, and that none of the directors of DeClout or VCC have any interest in the GTS investment, except through their respective shareholding interests in the company.
DeClout is due to hold its annual general meeting on April 30.
As at 11.51am on Tuesday, shares in DeClout were trading down 3.2 per cent, or 0.3 Singapore cent to 9.1 Singapore cents apiece.