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Shareholders block Capital World from issuing settlement shares
MINORITY shareholders of Catalist-listed Capital World have blocked a bid by the integrated property developer to issue 39 million new shares to convertible bond holder Chong Thim Pheng as part of a settlement agreement.
The votes were cast at a shareholder meeting on Monday. Capital World has 1.31 billion issued shares. It proposed the share issuance in November.
The Singapore Exchange (SGX) has questioned why the company wants to issue new shares to Mr Chong for S$8 million in principal value of Series B Bonds which were not drawn down, when it already intends to repay Mr Chong the entire S$10 million principal for the Series A Bonds drawn down, along with interests.
Since the settlement agreement has now been blocked, the convertible bond subscription agreement and other share charge agreements remain in full force and effect, Capital World said on Wednesday.
"The company will be in discussions with Dato’ Chong on the next course of action", it said.
If Mr Chong requires that additional shares be charged in his favour, failure to do so by the chargors – Siow Chien Fu, chief executive of Capital World, and substantial shareholders Colin Tan and Edwin Tan – will constitute an event of default, and Mr Chong may declare the bonds immediately due and payable, the group added.
On Wednesday, Capital World also clarified that its earlier answers to SGX's queries were not entirely accurate.
The group's reason for issuing the 39 million new shares to Mr Chong was that if the total number of shares charged to him were to increase to 550,964,187 as demanded to make up for Capital World's share price slide, he would have a deemed interest in 41.83 per cent of Capital World.
The group argued that it was better to cancel the convertible bond agreement and compensate Mr Chong with new shares since many of the operation contracts that the company had entered into require that the existing management remain in control of the company.
This is inaccurate. Rather, pursuant to a loan agreement entered into between a Capital World unit and Great View Finance in Oct 2017, the unit had warranted that Mr Siow and the Tan brothers were the major shareholders of the company at the time of entering into the loan agreement, Capital World clarified.
In relation to the group's joint venture agreements entered into with land owners, there is also no express written requirement for Mr Siow and the Tan brothers to remain as majority shareholders.
Trading in shares of Capital World was halted on Monday and will resume on Thursday. The shares last changed hands at S$0.05 on Jan 24.