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LionGold proposes S$1m in IPTs at controlling shareholder's request

CATALIST-LISTED LionGold Corp plans to scrap a subscription agreement for S$100 million in redeemable convertible bonds, ahead of a separate share issuance to a pair of Chinese private investors.

It will pay controlling shareholder Premier Equity Fund Sub Fund E a termination fee of S$500,000 in cash, and another S$51,291.10 to cover the outstanding principal and interest accrued, said the board, which noted that "the termination fee was proposed by the manager and agreed to by the board".

Gold miner LionGold inked a conditional termination agreement on Monday with Value Capital Asset Management, which manages the private equity sub-fund that agreed in 2015 to subscribe to the 2.5 per cent redeemable convertible bonds scheduled to mature on March 16, 2020.

The company also entered into a conditional option agreement on Monday to issue some 500 million share options at 0.1 Singapore cent apiece to the sub-fund, in a private placement that will not require a prospectus or offer information statement to be lodged. If all the options are validly exercised, the option agreement is expected to yield S$450,000 in net proceeds, for use as working capital.

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The value of the proposed termination fee and option share issuance comes up to S$1 million in all, or 30.34 per cent of the group's net tangible assets as at March 31, 2018, the board noted.

Giving its reasons for the arrangement, LionGold said that Value Capital Asset Management had asked for the proposed grant of options because of the planned redeemable convertible bonds termination.

"The option shares are exercisable at the discretion of the manager and upon exercise will provide additional funding to the company," LionGold's board added.

The proposed termination fee payment and options grant count as interested person transactions under listing rules, the board noted, and must get the nod from independent shareholders.

The board added that LionGold will appoint an independent financial adviser to provide an opinion about whether those transactions "are on normal commercial terms and are not prejudicial to the interests of the Company and its minority shareholders".

Premier Equity Fund Sub Fund E is a controlling shareholder of LionGold, with a direct stake of 18.23 per cent. But its interest could be diluted to 6.73 per cent once all the options have been exercised and another 21.81 billion new ordinary shares are issued to Chinese investors Yao Liang and Yao Yuan.

The deal with the Yaos' Singapore-incorporated investment vehicle, Yaoo Capital, was first announced on Dec 28, 2018. The Yaos were introduced to the company by chief executive Raymond Tan Soo Khoon, who met Mr Yao Liang as a client while a partner in Robert Wang & Woo, the board said at the time.

LionGold had said that the Yaoo Capital transaction was being done "to reduce the debt burden of the company". Its latest statement assumes that both the Yaoo Capital deal and the fresh Value Capital Asset Management agreement could together reduce net borrowings from S$16.9 million to S$705,000, while growing total equity from S$3.3 million to S$25.1 million.

LionGold plans to call a special general meeting to get shareholders' approval for the proposed termination of the redeemable convertible bonds and the proposed issuance of the option shares, on top of votes on the interested person transactions by independent shareholders.

LionGold, whose shares last traded at 0.1 Singapore cent, was one of three penny stocks - along with Blumont Group and Asiasons Capital, now Attilan Group - at the centre of a massive crash in 2013.

The trial of alleged masterminds John Soh Chee Wen and Quah Su-Ling began on Monday.