SHARE ISSUANCE FOR DEBT CAPITALISATION AND CASH

Transcription

1 SINO CONSTRUCTION LIMITED (Incorporated in the Republic of Singapore) (Company Registration No H) SHARE ISSUANCE FOR DEBT CAPITALISATION AND CASH I. Introduction The Company has today entered into letter agreements with its controlling shareholder, Mr. Zhao Chuan Wen ("Controlling Shareholder") and its independent directors, Messrs. Yap Wai Ming, Bob Low Siew Sie and Qin Zhong Sheng ("Independent Directors"), for the issuance of an aggregate 691,858,200 new shares in the capital of the Company ("New Shares") at the issue price of S$0.005 per New Share ("Share Issuance"). The Share Issuance is for purposes of capitalization of amounts owing to the Controlling Shareholder and Independent Directors, and for additional cash injection from the Controlling Shareholder. The Shareholder Issuance is subject to the approval of shareholders of the Company ("Shareholders") at an extraordinary general meeting to be convened ("EGM"), and the approval of the Singapore Exchange Securities Trading Limited ("SGX-ST") for the listing of and quotation for the New Shares. The Company will in due course be submitting its circular to convene the EGM to the SGX-ST for clearance prior to despatch to Shareholders, and also, be making an application for the listing of and quotation for the New Shares. II. Controlling Shareholder As at the date of this announcement, the Company has an outstanding loan of S$2,257,291 owing to the Controlling Shareholder, being non-interest bearing advances made by the Controlling Shareholder to the Company for the period from 1 January 2010 to 17 January 2013 to fund and pay its operating expenses and professional fees. In full and final settlement of the outstanding loan, the Company proposes to issue 451,458,200 New Shares to the Controlling Shareholder at the Issue Price. This debt capitalisation is subject to the Controlling Shareholder subscribing for an additional 180,000,000 New Shares at the Issue Price for the cash consideration of S$900,000, which proceeds are to be utilised by the Company for its working capital. III. Independent Directors As at the date of this Announcement, the Company also has an aggregate outstanding amount of S$176,000 owing to the Independent Directors, being directors' fees due and payable to the Independent Directors for services rendered in the fourth quarter of the financial year ended 31 December ("FY") 2011 and FY2012. The breakdown of amount owing to each Independent Director is as follows: (a) (b) (c) Mr. Yap Wai Ming S$76,000; Mr. Bob Low Siew Sie S$66,500 and Mr Qin Zhong Sheng S$33,500. In conjunction with the debt capitalisation and cash injection by the Controlling Shareholder, and to conserve limited cash resources of the Company, the Company proposes to issue 35,200,000 New Shares to the Independent Directors at the Issue Price in full and final satisfaction of the outstanding directors' fees. Subject to Shareholders' approval at the forthcoming Annual General Meeting of the Company for FY2012 which is to be held towards the end of June 2013, the Company further expects to pay an aggregate amount of S$126,000 as directors' fees to the Independent Directors for FY2013, apportioned as follows: Page 1

2 (i) (ii) (iii) Mr. Yap Wai Ming S$56,000; Mr. Bob Low Siew Sie S$49,000; and Mr Qin Zhong Sheng S$21,000. The Company similarly proposes to issue 25,200,000 New Shares at the Issue Price to the Independent Directors for the directors' fees which are payable for FY2013. These New Shares will only be issued to the Directors upon the FY2013 directors' fees being due and payable. IV. New Shares The New Shares comprise as follows: Name No. of New Shares % of Existing Issued Share Capital (1) Controlling Shareholder % of Enlarged Issued Share Capital (2) 631,458, Yap Wai Ming 26,400, Bob Low Siew Sie 23,100, Qin Zhong Sheng 10,900, Total 691,858, Notes: (1) The existing issued share capital comprises 685,305,599 ordinary shares ("Shares"). (2) The enlarged issued share capital will comprise 1,377,163,799 Shares. The New Shares, when issued and allotted, shall rank pari passu in all respects with the existing Shares, including rights to any dividend, right, allotment or other distributions, the record date for which falls on or after the date of issuance. V. Issue Price The Issue Price for each New Share is S$0.005, which represents a discount of approximately 78.70% to the volume weighted average price of S$0.023 for trades done on the SGX-ST on 15 May 2013, being the full market day prior to this announcement. VI. Rationale The Group is in dire financial circumstance and the cash injection is critical to the continuing operations of the Company, as the Company's cash resources have been exhausted, and it is unable to pay for its ongoing operating costs and expenses. The difficult business environment faced by the Group as announced by the Company on 14 November 2012, coupled with the recent events that took place since late December 2012, have put the Group and the Company under dire cash flow constraints. These adverse events, amongst others, include the Company's expenditure in connection with the unsuccessful conditional cash offer by Allegro Sky Global Capital Ltd ("Offer") for all the issued and paid-up ordinary shares in the capital of the Company as announced on 12 March 2013; the immediate withdrawal of RM300 million stand-by credit facility and the demand for early repayment of a RMB50 million bank loan owed by a subsidiary as announced on 15 January 2013; the cessation of further financing by the Controlling Shareholder to the Company due to his other personal commitments as announced on 21 January 2013; and the demand by trade creditors to the Company's wholly-owned subsidiaries for repayment of outstanding trade payables totalling RMB43.4 million as announced on 4 February As announced on 29 January 2013, 7 February 2013 and 21 February 2013, the Company had approached numerous banks and financial institutions in the PRC and Singapore for alternative financing, but the responses Page 2

3 received had been unanimously unfavorable. Due to the lack of available funds as a result of non-availability of credit facility and shareholder's loan from Mr. Zhao to fund the Group's operations, the Group will be unable to carry on its operations and meet its ongoing obligations. In its attempt to raise funds, the Company has approached many prospective parties (including financial institutions, funds and high net-worth individuals) to seek financing for and/or investments in the Company, but its attempts have been totally unsuccessful. The prospective parties whom the Company has approached had all very quickly declined to consider any proposals, citing the unattractive prospects, uncertainty and viability of the Group's going concern, and losses of the Group. This was notwithstanding the Company being prepared to place out its Shares at a steep discount to prevailing market price. The abovementioned circumstances require the Company to raise cash on an urgent basis to fund its ongoing operating expenses which comprise audit fees, professional fees, corporate secretarial fees and payroll expenditure for its Singapore based financial controller. Furthermore, with the unsuccessful attempt to privatize the Company via the Offer, the Company will continue to remain a listed entity on SGX-ST and additional funds will be required to enable the Company to comply with its listing obligations and to maintain its listing status. In addition, to continue as a going concern, additional professional fees may be incurred to restructure the Group's existing business. A breakdown of the Company's operating expenses payable, including outstanding and estimated expenses for FY2013, is set out below: S$'000 Compliance and listing expenses 68 Directors' fees for fourth quarter of FY2011 and FY Directors' fees for FY2013 (1) 126 Office expenses (2) 224 Payroll expenses from May 2013 to December Offer expenses 107 Internal and external auditors' fees for FY Internal and external auditors fees for FY2013 (3) 120 Legal fees in respect of acquisition of Daqing Sunshine Reli Thermal Co., Ltd. 25 Expenses in relation to restructuring of the Group's businesses 90 Placement expenses incurred for the Share Issuance 60 Total expenses payable 1,202 Less: Directors' fees if New Shares are issued to the Independent Directors pursuant to the Share Issuance (302) Net expenses payable 900 Notes: (1) Subject to Shareholders' approval at the forthcoming Annual General Meeting of the Company for FY2012. (2) Comprises office rental for FY2011, FY2012 and FY2013, withholding tax on PRC directors' fees and other office expenses (including travelling and insurance) amounting to S$181,000, $$8,400 and S$35,600 respectively. (3) Estimated based on FY2012 fees, subject to further approval by the directors. Page 3

4 Having considered the urgent need to fund the Company's operations and to settle outstanding expenses of approximately S$500,000, the Company had approached the Controlling Shareholder and after many negotiations, reached an agreement on a further cash injection from the Controlling Shareholder, coupled with a capitalization of the existing loan owing by the Company to the Controlling Shareholder, at the Issue Price. In conjunction with the debt capitalization and cash injection by the Controlling Shareholder, the Share Issuance to the Independent Directors will help the Company conserve limited cash to finance its other operating expenses over a longer period of time. Shareholders should note that the cash injection by the Controlling Shareholder pursuant to the Share Issuance will only sustain the Company's operating expenses for FY2013. The Group as a whole will continue to face significant cash flow constraints. As mentioned in the Group's unaudited financial statements for the first quarter of FY2013 announced on 10 May 2013, the Group has net cash and bank balances of RMB10.7 million, being a decrease of RMB2.8 million from FY2012, as a result of net cash outflows from operating activities during the first quarter of FY2013. The Group (other than the Company) would require operating expenses, amongst others, including payroll expenses, purchase of coal for heating segment and other operating expenses of approximately RMB96.4 million for FY2013. As such, notwithstanding the Share Issuance, the Company will need to continue with its efforts to raise funding as well as explore other possibilities. VII. Shareholders' Approval The Share Issuance to the Controlling Shareholder and the Independent Directors are subject to specific Shareholders' approval under the SGX-ST Listing Manual. In this regard: (a) Rule 805(1) of the Listing Manual provides that an issuer must obtain the prior approval of shareholders in a general meeting for the issue of shares or convertible securities or the grant of options carrying rights to subscribe for shares of the issuer except where a general mandate for such issue has been previously obtained from shareholders in a general meeting. Taking into account the number of New Shares to be issued pursuant to the Share Issuance, the Company is seeking a specific mandate from Shareholders to undertake the same. (b) Rule 804 of the Listing Manual provides that, except in the case of an issue made on a pro rata basis to shareholders or a scheme referred to in Part VIII of Chapter 8 of the Listing Manual, no director of an issuer, or associate of the director, may participate directly or indirectly in an issue of equity securities or convertible securities unless shareholders in general meeting have approved the specific allotment. Such directors and associates must abstain from exercising any voting rights on the matter. Rule 812 of the Listing Manual provides that an issue of securities must not be placed to, inter alia, an issuer's directors and substantial shareholders unless specific shareholder approval for such placement has been obtained, with such directors and substantial shareholders and their associates abstaining from voting on the shareholders' resolution to approve such placement. The Share Issuance is made to the Independent Directors and the Controlling Shareholder and is therefore subject to Shareholders' approval. (c) Rule 811(1) of the Listing Manual provides that an issue of shares must not be priced at more than 10% discount to the weighted average price for trades done on the SGX-ST for the full market day on which the placement or subscription agreement was signed. Rule 811(3) of the Listing Manual provides, inter alia, that Rule 811(1) of the Listing Manual is not applicable if specific shareholder approval is obtained for the issue of shares. The Issue Price is at a steep discount to the weighted average price for trades done on the SGX-ST for the full market day prior to this announcement and is therefore subject to Shareholders' approval. (d) Rule 906 of the Listing Manual provides that an issuer must obtain shareholder approval for any interested person transaction equal to or more than S$100,000 and of a value equal to, or more than: (i) 5% of the group's latest audited net tangible assets; or Page 4

5 (ii) 5% of the group's latest audited net tangible assets, when aggregated with other transactions entered into with the same interested person during the same financial year. The Share Issuance to the Controlling Shareholder constitutes an interested person transaction under Chapter 9 of the Listing Manual. Based on the unaudited financial statement of the Group for FY2012, the net tangible assets ("NTA") of the Group is RMB149,932,000, which based on an exchange rate of S$1:RMB5.0984, is approximately S$29,408,000 The aggregate Issue Price of the New Shares to be issued to the Controlling Shareholder represents approximately 10.74% of the NTA of the Group. VIII. Use of Proceeds The Share Issuance to the Controlling Shareholder and the Independent Directors for capitalisation of the amounts owing to them will not result in any new cash proceeds for the Company. The net cash proceeds of approximately S$840,000 (after deduction for expenses) arising from the cash injection by the Controlling Shareholder will be applied as working capital of the Company. Pending the deployment of the net proceeds, they may be deposited with banks and/or financial institutions, invested in short-term money market instruments or debt instruments or used for any other purposes on a shortterm basis as the directors may deem fit. The Company will make periodic announcements on the utilisation of proceeds from the Share Issuance as and when such proceeds are materially disbursed, and provide a status report on the use of such proceeds in the Company's annual report. IX. Financial Effects For illustrative purposes only, the financial effects of the Share Issuance set out below were prepared based on the unaudited financial statements of the Group for FY2012 and subject to the following assumptions: (a) (b) (c) the computations are purely for illustrative purposes only and do not reflect the actual financial result and financial position of the Group after the Share Issuance; for purposes of computing the effect of the Share Issuance on the NTA per Share, it is assumed that the Share Issuance had been completed on 31 December 2012; and for purposes of computing the effect of the Share Issuance on the EPS, it is assumed that the Share Issuance had been completed on 1 January Share Capital Before Share Issuance After Share Issuance Number of Shares 685,305,599 1,377,163,799 Issued and paid up share capital S$88,311,753 S$91,711,044 NTA Before Share Issuance After Share Issuance NTA S$29,408,000 S$32,681,000 NTA per Share S$0.043 S$0.024 Page 5

6 Loss Per Share Before Share Issuance After Share Issuance Losses attributable to Shareholders S$97,416,000 S$97,416,000 Loss per Share S$0.15 S$0.07 Gearing (1) Before Share Issuance After Share Issuance Net Debt S$7,302,000 S$6,462,000 Shareholders' Funds (2) S$16,695,000 S$19,968,000 Gearing Ratio Notes: (1) Gearing is computed based on net debt, being total borrowings less cash and cash equivalents, divided by Shareholders' funds. (2) Shareholders' funds refer to the aggregate amount of the Group's share capital and reserves, net of reserve funds which are appropriated in accordance with the relevant PRC regulations and not available for distribution as dividends to shareholders in the ordinary course of business. X. s of Directors and Substantial Shareholders Save for the Controlling Shareholder and Independent Directors, none of the directors or substantial Shareholders has any interest, direct or indirect, in the Share Issuance. The interest of the directors and Substantial Shareholders of the Company as at the date of this announcement and (assuming there is no change to the issued share capital of the Company other than the Share Issuance) immediately after the Share Issuance is set out below. (2) (1) Current Immediately after the Share Issuance Number of Shares Number of Shares Direct Deemed Total % (1) Direct Deemed Total % (2) Directors Zhou Zhong Xing Yap Wai Ming , , Bob Low Siew Sie , , Qin Sheng Zhong , , Page 6

7 Current (1) Immediately after the Share Issuance (2) Number of Shares Number of Shares Direct Deemed Total % (1) Direct Deemed Total % (2) Substantial Shareholders (Other than Directors) Sino Xin Yuan Construction Investments Pte. Ltd. (3) Controlling Shareholder 502,425.2 (4) - 502, ,133, ,133, , , ,133, ,133, Notes: (1) Based on 685,305,599 issued Shares as at the date of this announcement. (2) Based on the enlarged issued share capital comprising 1,377,163,799 Shares immediately after the Share Issuance. (3) Sino Xin Yuan Construction Investments Pte. Ltd. ("Sino Xin Yuan") is an investment holding company incorporated in the British Virgin Islands on 27 April The sole shareholder and director of Sino Xin Yuan is the Controlling Shareholder. (4) 366,930,599 Shares are held in the name of nominee, HSBC (Singapore) Nominees Pte Ltd. XI. Financial Controller The Company would also like to inform Shareholders that it has persuaded its financial controller, Ms. Daisy Ong Lizhen, to withdraw her earlier resignation as announced on 15 February 2013, and Ms. Ong will continue to support the Company in her current role. XII. Responsibility Statement The Directors collectively and individually accept full responsibility for the accuracy of the information given in this announcement and confirm after making all reasonable enquiries that, to the best of their knowledge and belief, this announcement constitutes full and true disclosure of all material facts about the Share Issuance and the Group and the Directors are not aware of any facts the omission of which would make any statement in this announcement misleading. Where information in this announcement has been extracted from published or otherwise publicly available sources or obtained from a named source, the sole responsibility of the Directors has been to ensure that such information has been accurately and correctly extracted from those sources and/or reproduced in this announcement in its proper form and context. XIII. Documents Available for Inspection A copy each of the letter agreements entered into between the Company, the Controlling Shareholder and the Independent Directors is available for inspection at the Company's registered office at 21 Merchant Road, #04-01, Royal Merukh S.E.A. Building, Singapore , during normal business hours for a period of three (3) months commencing from the date of this announcement. XIV. Cautionary Statement Shareholders and potential investors should note that the Share Issuance is subject to the approval of Shareholders and the SGX-ST for the listing of and quotation for the New Shares and accordingly, may not materialise in the event these conditions are not satisfied. Shareholders should therefore exercise caution when trading in the shares of the Company. Persons who are in doubt as to the action they should take should consult their legal, financial, tax or other professional advisers. Page 7

8 BY ORDER OF THE BOARD Zhou Xing Zhong Executive Director 16 May 2013 Page 8