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Manhattan Resources proposes debt conversion, share issue exercise

MAINBOARD-LISTED Manhattan Resources is proposing a debt conversion and share issue exercise that would hand a 61.9 per cent stake in the enlarged share capital of the firm to two creditors, both of which are entities owned by chief executive Low Yi Ngo and his family members.

Manhattan is presently controlled by the father of Mr Low, Dato Low Tuck Kwong, who owns 62 per cent of the company.

In a bourse filing on Friday, the watch-listed firm proposed the conversion of up to US$27.2 million owed to creditors Energy Resource Investment (ERI) and Kaiyi Investment to shares of Manhattan, at a conversion price of S$0.02.

Manhattan would then issue a maximum of 1.9 billion conversion shares to ERI and Kaiyi, representing 61.9 per cent of the firm's enlarged share capital, or 163 per cent of its existing issued share capital.

The S$0.02 conversion price represents the weighted average price for trades done on June 17. Post-conversion, ERI would own 27.8 per cent of Manhattan, while Kaiyi would own 34.1 per cent.

ERI is owned by Manhattan CEO Mr Low, as well as his sister Elaine Low and mother Wong Kai Lai, each controlling a third of the entity.

Meanwhile, Kaiyi is controlled mainly by Mr Low and Ms Low, each of whom owns 36 per cent of the entity. Ms Wong owns 17 per cent of Kaiyi, while her husband Dato Low owns 11 per cent.

The rationale for the exercise is to improve Manhattan's cash flow and debt-to-equity position, the company said in the filing.

"The proposed debt conversion would… ease the Group's cash flow as the obligation to repay the participating debts via cash will be settled via the issuance of conversion shares, so that the group's cash can be used for other purposes. This will strengthen the Group's balance sheet and improve its debt-equity position," Manhattan said.

As at June 21, Manhattan's wholly-owned unit SLM owes US$12.2 million to ERI, the sum being the outstanding payment for SLM's purchase of a stake in Kariangau Power from ERI under a 2016 agreement.

As part of the proposed debt conversion, Manhattan is also looking to propose a novation, where the repayment obligations of the US$12.2 million sum are transferred to Manhattan from SLM.

Separately, as at June 21, Kaiyi has disbursed US$8 million out of the US$15 million interest-free loan it has extended to Manhattan, under loan agreements in December 2018 and March 2019. Kaiyi is set to disburse the remaining US$7 million to Manhattan in two tranches in September and December this year.

The proposed debt conversion will cut Manhattan's net tangible asset value per share from 6.75 Singapore cents to 3.81 Singapore cents.

Under listing rules, the proposed debt conversion is an interested-party transaction and will require shareholder approval. Dato Low, Mr Low, Ms Low and their associates will abstain from voting.

Manhattan will despatch a circular on the transaction and notice for an extraordinary general meeting to shareholders in due course.

Shares of Manhattan closed flat at S$0.02 on Friday.