Hiap Seng Engineering proceeds with conditional subscription agreement with investors

FOLLOWING its entry on Dec 9, 2021 into a non-binding term sheet, beleaguered Hiap Seng Engineering on Friday (Jan 7) inked a conditional subscription agreement with an associate company of mainboard-listed logistics player Vibrant Group, as well as Tian Yuan, the chief executive of construction company CGC Group.

The duo shall subscribe for S$8 million in new shares in either Hiap Seng Engineering or a newly incorporated entity, Hiap Seng Investment.

The plan is to transfer the listing status of Hiap Seng Engineering to the new company, of which Hiap Seng Engineering will then become a fully-owned subsidiary.

Vibrant Equities will subscribe for S$6 million and Tian Yuan for S$2 million in new shares in either the new company - if the transfer listing is completed - or in Hiap Seng Engineering if the transfer listing is not completed, at a price of S$0.00543 per subscription share.

The subscription shares are expected to represent about 47.1 per cent of the enlarged share capital of Hiap Seng or the new company, with Vibrant Equities being a new controlling shareholder.

Vibrant Equities is 40 per cent owned by Vibrant Group, with 2 brothers of Vibrant Group's majority shareholder each holding another 30 per cent stake.

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In its filing with the Singapore Exchange, Hiap Seng also said that all S$8 million of the proceeds from the proposed subscription will be used for the partial settlement, in cash, of the principal amounts and interests under loans owing to its principal banker, UOB.

Vibrant Equities and Tian Yuan shall also be granted options of S$6 million and S$2 million respectively to acquire further new shares in Hiap Seng Engineering or the new company, as the case may be.

The options shall be exercisable over a 2-year period, at the option price of S$0.00543 per share for each option share if exercised within the first 12 months, or at a 10 per cent premium in the following 12 months.

Vibrant Equities and Tian Yuan will hold about 48 per cent and 16 per cent respectively of the options-enlarged share capital, if all the options are exercised in the first year; or 47.2 per cent and 15.7 per cent if the options are exercised in full in the second year.

The aggregate gross proceeds of S$8 million from the issuance of option shares, assuming all the options are exercised, shall be used fully for the general working capital of the company, Hiap Seng said.

The company also plans to raise up to S$3.3 million in a rights issue, proceeds of which are to be used for its working capital needs. Executive Richard Tan and/or his family will undertake to subscribe for S$1 million of rights shares. Other shareholders can also take part in the rights exercise, except for Vibrant Equities and Tian Yuan.

Hiap Seng Engineering has been in judicial management since September 2020. Trading in its shares has been suspended since Nov 28, 2019.

In its filing, Hiap Seng said that it plans to pursue a debt restructuring exercise via part-cash and part-equity settlement for the principal and interest under loans owing to UOB, and outstanding amounts due to all other unsecured creditors of the company.

Completion of the proposed transactions will be subject to, among other things, Hiap Seng or the new company entering into definitive agreements with UOB for the settlement of amounts owed. Approvals are also required from the Securities Industry Council for a whitewash waiver, SGX, shareholders and JTC.