MERCATOR LINES (SINGAPORE) LIMITED (Incorporated in the Republic of Singapore) Company Registration No N ANNOUNCEMENT

Transcription

1 MERCATOR LINES (SINGAPORE) LIMITED (Incorporated in the Republic of Singapore) Company Registration No N ANNOUNCEMENT PROPOSED ISSUE OF US$19 MILLION IN AGGREGATE PRINCIPAL AMOUNT OF CONVERTIBLE BONDS DUE INTRODUCTION The Board of Directors (the Board ) of Mercator Lines (Singapore) Limited (the Company or the Issuer ) wishes to announce that it has on 27 April 2012, entered into a subscription agreement (the Subscription Agreement ) with the Company s immediate holding company, Mercator International Pte. Ltd. ( Mercator International ) pursuant to which the Company agrees to issue, and Mercator International agrees to subscribe for, US$19 million in aggregate principal amount of convertible bonds due 2017 (the Convertible Bonds ) on the terms and conditions set out therein (the Bonds Issue ). The Convertible Bonds are convertible into fully paid-up new ordinary shares (the Shares ) in the capital of the Company (the Conversion Shares ) at a conversion price of S$ (the Conversion Price ) which represents 110% of the volume-weighted average price ( VWAP ) for trades of the Shares done on the Singapore Exchange Securities Trading Limited (the SGX-ST ) on the date of the Subscription Agreement, being S$ PRINCIPAL TERMS OF THE CONVERTIBLE BONDS The principal terms and conditions (the Conditions ) of the Convertible Bonds are summarised as follows: Issue Size : US$19 million in aggregate principal amount of Convertible Bonds. Issue Price : 100 per cent. in aggregate principal amount of the Convertible Bonds. Conversion Price : S$0.1670, subject to adjustment in the manner provided in the Conditions. Interest : The Convertible Bonds will bear interest at the rate of 7.0 per cent. per annum, payable semi-annually in arrear. Maturity Date : Five (5) years from the date of issue ( Original Issue Date ) of the Convertible Bonds (the Maturity Date ). Security : The Convertible Bonds would be secured by a first preferred mortgage over Kalpana Prem (the Vessel ), 1

2 a general assignment of the earnings and insurances of the Vessel and an accounts charge to cover up to 110% of all outstanding Convertible Bonds at any time. Further details of the Vessel are set out below. Conversion Period : Bondholders (as defined in the Conditions) have the right to convert their Convertible Bonds into Shares at any time on and after the Original Issue Date up to the close of business (at the place where the Certificate (as defined in the Conditions) evidencing such Convertible Bond is deposited for conversion) on the date that is five business days before the Maturity Date (but, except as provided in the Conditions, in no event thereafter) or if such Bondholder has given notice to the Company requiring the Company to redeem such Convertible Bond before the Maturity Date pursuant to the Conditions, then up to the close of business (at the place aforesaid) on a date no later than five business days (in the place aforesaid) prior to the date fixed for redemption thereof. Final Redemption : Unless previously redeemed or converted and cancelled, the Convertible Bonds will be redeemed on the Maturity Date at the outstanding principal amount plus accrued and unpaid interest. Transferability : Freely transferable. Subject to applicable laws, a Convertible Bond may be transferred by delivery of the Certificate issued in respect of that Convertible Bond, with the form of transfer on the back duly completed and signed by the holder or his attorney duly authorised in writing, to the Issuer. No transfer of a Convertible Bond will be valid unless and until entered on the Register (as defined in the Conditions). The Convertible Bonds will not be listed on the SGX-ST. Form and Denomination : The Convertible Bonds will be issued in registered form in the denomination of US$500,000 or higher integral multiples thereof, without coupons attached. Conversion Price Adjustments : The Conversion Price shall be subject to adjustments in certain circumstances, including but not limited to stock splits, rights issues, cash or shares dividend distributions, bonus issues or the occurrence of certain other dilutive events. 2

3 Status of the Convertible Bonds : The Convertible Bonds constitute direct and unconditional obligations of the Company and shall at all times rank pari passu and without preference or priority among themselves. The payment obligations of the Company under the Convertible Bonds shall, save for obligations which are mandatorily preferred by law, at all times rank effectively senior to all of the Company s existing and future unsecured indebtedness to the extent of the value of the collateral securing the Convertible Bonds. Status of Conversion Shares : The Conversion Shares when issued upon conversion of the Convertible Bonds will be fully paid and in all respects rank pari passu with the Shares in issue on the relevant Registration Date (as defined below). Save as set out in the Conditions, a holder of the Conversion Shares shall not be entitled to any rights, the record date for which precedes the relevant Registration Date. Registration Date means the date on which the Company registers in its register of members the person designated to hold the relevant number of Conversion Shares issued pursuant to a Bondholder s exercise of its conversion right. Redemption at the Option of the Company : (i) The Company may, having given not less than 30 nor more than 60 days' notice to the Bondholders (which notice shall be irrevocable), redeem the Convertible Bonds at the accreted principal amount ( Accreted Principal Amount ) together with accrued interest, in whole or in part, at any time on or after the date falling two years from the Original Issue Date to one month prior to the Maturity Date, if on each of not less than 30 consecutive Trading Days (as defined in the Conditions) ending not earlier than 14 days prior to the date on which the notice of redemption is given to the Bondholders, the Aggregate Value shall have been at least 130% of the Accreted Principal Amount of Convertible Bonds. Aggregate Value = N x MP MP is the closing price for the Shares on such Trading Day, (provided that if on such Trading Day the closing price is quoted cum-dividend, then for the purposes of this definition MP, the closing price for such Trading Day shall be 3

4 deemed to be the amount thereof reduced by the Fair Market Value (as defined in the Conditions) (on the date of first public announcement of such dividend) of such dividend per Share), translated into US dollar at the prevailing rate on such Trading Day. N is the number of Shares which would fall to be issued on conversion of the principal amount of Convertible Bonds assuming the Conversion Date in respect thereof to be such Trading Day Accreted Principal Amount shall be calculated in accordance with the following formula: Accreted Principal Amount = (Previous Accreted Principal Amount) x (1+(r))x(d/p) AI Previous Accreted Principal Amount is the Accreted Principal Amount on the annual date immediately preceding the anniversary date to be re-calculated on an annual basis r is Yield to Maturity, being 7.0% d is number of days from and including the immediately preceding anniversary date compounded annually, calculated on the basis of the number of days elapsed and a 365 day year P is 365 AI is accrued interest (if any) on the Convertible Bonds (ii) (iii) 4 The Company may, having given not less than 30 nor more than 60 days' notice to the Bondholders (which notice shall be irrevocable), redeem the Convertible Bonds at their Accreted Principal Amount, together with unpaid interest accrued to but excluding the redemption date, in whole or in part, at any time on or after the date falling three years from the Original Issue Date to one month from the Maturity Date. If at any time the aggregate principal amount of the Convertible Bonds outstanding is less than 10 per cent. of the aggregate principal amount

5 originally issued (including any Convertible Bonds issued pursuant to the Conditions), the Company may, having given not less than 30 nor more than 60 days' notice to the Bondholders (which notice shall be irrevocable), redeem such outstanding Convertible Bonds in whole but not in part at their Accreted Principal Amount, together with unpaid interest accrued to but excluding the redemption date. (iv) If the Company elects to redeem the Convertible Bonds, the Company will give the requisite notice of redemption to Bondholders, which notice shall include a notice to Bondholders of their right to exercise their right of conversion prior to the redemption date. Where Bondholders do not exercise their right of conversion prior to the redemption date, the Convertible Bonds will be redeemed by the Company in accordance with the Conditions. Redemption for Taxation Reasons : At any time the Company may, having given not less than 30 nor more than 60 days' notice to the Bondholders (which notice shall be irrevocable) redeem all, and not some only, of the Convertible Bonds at their Accreted Principal Amount, together with unpaid interest accrued to but excluding the redemption date (the Tax Redemption Date ), if (i) the Company has or will become obliged to pay additional amounts as referred to in the Conditions as a result of any change in, or amendment to, the laws or regulations of Singapore or any political subdivision or any authority thereof or therein having power to tax, or any change in the general application or official interpretation of such laws or regulations and (ii) such obligation cannot be avoided by the Company taking reasonable measures available to it, provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Company would be obliged to pay such additional amounts were a payment in respect of the Convertible Bonds then due. Prior to the publication of any notice of redemption pursuant to this paragraph, the Company shall deliver to the Bondholders (a) a certificate signed by two directors of the Company stating that the obligation referred to in (i) above cannot be avoided by the Company (taking reasonable measures available to it) and (b) an opinion of independent legal or tax advisors of recognised international standing to the effect that such change or 5

6 amendment has occurred (irrespective of whether such amendment or change is then effective) and the Company has or will become obliged to pay additional amounts as referred to in the Conditions, such certificate shall be deemed to be sufficient evidence thereof and of the fulfillment of the requirements in (i) and (ii) above, in which event it shall be conclusive and binding on the Bondholders. Events of Default : Upon the occurrence of any of the events of default specified in the Conditions, any Convertible Bond may, by notice given to the Company by the holder of such Convertible Bond, be declared immediately due and payable. Liquidation : In the event that the Company goes into liquidation, the Convertible Bonds will rank: (a) on parity among themselves; and (b) effectively senior to all of the Company s existing and future unsecured indebtedness to the extent of the value of the Vessel securing the Convertible Bonds. Certain details of the Vessel are set out below: Name : Kalpana Prem Type : Geared Panamax Capacity (dwt) : 73,652 Age (in years) : 12 Shipyard : Imabari Shipyard, Japan Book Value (as at 31 March 2011) (US$ million) : CONVERSION SHARES The number of Conversion Shares to be issued on conversion of a Convertible Bond will be determined by dividing the principal amount of the Convertible Bonds to be converted (translated into Singapore dollars at the fixed exchange rate of US$1 = S$1.2397) by the relevant Conversion Price. Based on the Conversion Price of S$ and assuming no further adjustments to the Conversion Price, the maximum number of Conversion Shares to be allotted and issued by the Company, pursuant to the full conversion of the Convertible Bonds, is 141,060,606, representing approximately 11.27% of the existing issued share capital of the Company as at the date of this Announcement. 4. RATIONALE OF THE PROPOSED BONDS ISSUE The rationale for the Bonds Issue is to raise funds for working capital requirement, dry dock expenses, charter payments, loan servicing and capital expenditure in the normal course of business. 6

7 The directors of the Company (the Directors ) believe that the Bonds Issue is favourable to the Company on the basis of the following: (i) (ii) (iii) (iv) (v) (vi) (vii) shipping markets are currently going through a low cycle with the Baltic Dry Index ( BDI ) at its lowest in the past 25 years. The Directors believe it would be prudent for the Company to shore up its liquidity and accordingly, the Company has explored raising long term funds in the form of the Convertible Bonds, which would provide the Company with liquidity as well as flexibility; the proposed structure and terms of the Bonds Issue are more favourable to the Company compared to the typical structure and terms of funding options currently reasonably available from banks and financial institutions for similar amounts of borrowings (which benefits include, but are not limited to, bullet repayments, low asset cover and a call option); the global economic scenario has continued to remain volatile affecting capital markets throughout the world. Due to continuing worries in the Eurozone, the Directors feel that investors are not showing any confidence in the capital markets. Moreover, with the dry bulk industry BDI at an all time low, this has further diminished the opportunities for shipping companies to raise funds from the capital markets; since the Convertible Bonds are proposed to be subscribed by Mercator International, the process will be shorter and more cost-effective as compared to raising money from the capital markets; raising long term funds through the Convertible Bonds would help the Company to diversify its funding sources since its capital structure would have a mix of equity, convertible bonds and term loans; despite the difficult industry scenario and overall liquidity issues in financial markets, Mercator International s intention to subscribe to the Convertible Bonds will boost stakeholders confidence in the Company; and the fixing of the initial Conversion Price at S$0.1670, being 110% of the VWAP for trades of the Shares done on the SGX-ST on the date of the Subscription Agreement, being S$0.1518, provides a mechanism to ensure that the conversion of the Convertible Bonds will not result in a dilution to the issued share capital of the Company at a discount of more than 10% to the VWAP for trades of the Shares done on the SGX-ST as at the date of the Subscription Agreement. 5. INTERESTED PERSON TRANSACTION Mercator Limited ( Mercator India ) is a company incorporated in India, and is the ultimate holding company of the Company. Mercator International, a wholly-owned subsidiary of Mercator India, directly holds 900,850,000 shares, representing per cent. of the issued share capital of the Company. To demonstrate its commitment to the Company, Mercator International proposes to subscribe for the entire Bonds Issue. 7

8 The Bonds Issue is considered to be an interested person transaction for the Company under Chapter 9 of the SGX-ST Listing Manual ( Listing Manual ) as Mercator International is the controlling shareholder of the Company and, thus, an interested person for the purposes of Chapter 9 of the Listing Manual. The amount at risk to the Company is a combination of: (i) (ii) the aggregate interest payable on the Convertible Bonds from the period commencing from the Original Issue Date up to the Maturity Date (as defined below) (assuming that none of the Convertible Bonds are converted prior to the Maturity Date), being US$6.65 million; and the value of the aggregate principal amount of the Convertible Bonds, being US$19 million. Based on the issue size of US$19 million in aggregate principal amount of the Convertible Bonds, the amount at risk amounts to approximately US$25.65 million) representing approximately 6.64% of the latest audited consolidated net tangible assets ( NTA ) of the Company and its subsidiaries (the Group ) of US$ million as at 31 March Under Chapter 9 of the Listing Manual (which governs interested person transactions) where the value of a transaction with an interested person singly, or, on aggregation with the values of other transactions conducted with the same interested person in the same financial year equals or exceeds 5% of the Group s latest audited NTA, that transaction shall be subject to shareholders approval. Accordingly the Bonds Issue, the value of which (being the amount to which the Company is considered to be at risk as mentioned above) is more than 5% of the latest audited consolidated NTA of the Group, is an interested person transaction which is subject to the approval of the Company s shareholders ( Shareholders ) at an extraordinary general meeting ( EGM ) to be convened pursuant to Rule 906(1)(a) of the Listing Manual. KPMG Corporate Finance Pte Ltd (the IFA ) has been appointed as independent financial adviser to advise the independent Directors and the audit committee of the Company ( Audit Committee ) on whether or not the Bonds Issue is on normal commercial terms and is not prejudicial to the interests of the Company and its minority Shareholders. The opinion of the IFA will be set out in the Circular (as defined below), together with the view of the Audit Committee. Except for the transactions mentioned in sub-paragraphs (a) to (c) below, the Company, its subsidiaries and associated companies which, for the purposes of Chapter 9 of the Listing Manual, are considered to be entities at risk, have not entered into transactions with the Company s interested persons or their associates (including Mercator India and Mercator International) since the beginning of the financial year ending 31 March 2013 up to the date of this Announcement: (a) (b) the Bonds Issue; transactions less than S$100,000 in value; and 8

9 (c) the under-mentioned transactions with Mercator India. Particulars of Interested Person Transactions Aggregate Value (S$ million) Charges payable (Lighterage expenses) to Mercator India 0.8 Other expenses payable to Mercator India RESTRICTED PLACEE Mercator International is a restricted placee under Rule 812(1) of the Listing Manual. Pursuant to Rule 812(2) of the Listing Manual, Rule 812(1) of the Listing Manual will not apply if specific shareholder approval for the Bonds Issue is obtained. 7. USE OF PROCEEDS The Company intends to allocate all 100 per cent. of the net proceeds from the Bonds Issue (after the deduction of issue expenses) for working capital requirement, dry dock expenses, charter payments, loan servicing and capital expenditure in the normal course of business. The Company shall announce the use of the proceeds as and when such funds are materially disbursed and whether such a use is in accordance with the stated use and in accordance with the percentage allocated in this Announcement. Where there is any material deviation from the stated use of proceeds, the Company shall announce the reasons for such deviation. The Company shall also provide a status report on the use of proceeds in its annual report. 8. REQUIRED APPROVALS The Bonds Issue is conditional upon, inter alia, the approval in-principle of the SGX-ST for the listing and quotation of the Conversion Shares and the specific approval from the Shareholders for the issue of the Convertible Bonds and the allotment and issue of the Conversion Shares being obtained at the EGM to be convened. The Company will make an application to the SGX-ST for the listing and quotation of the Conversion Shares. An appropriate announcement on the outcome of the application will be made and a circular (the Circular ) containing information on the Bonds Issue will be despatched to Shareholders in due course. 9. FINANCIAL EFFECTS OF THE BONDS ISSUE It is not possible at the date of this Announcement to determine precisely the financial effects of the Bonds Issue on the Company or the Group until the Convertible Bonds have been fully converted or otherwise redeemed. However, FOR PURPOSES OF ILLUSTRATION ONLY, the financial effects of the Bonds Issue, based on the last audited financials of the Company on 31 March 2011, on the share capital, NTA and NTA per Share and gearing of the Company and the Group in connection with the issue of US$19 million in aggregate principal amount of Convertible Bonds at the Conversion Price of S$0.1670, have been set out in the Appendix to this Announcement. For the avoidance of doubt, nothing in this Announcement may be treated as a representation by the Company as to the trading price of the Shares on the SGX-ST during the term of the 9

10 Convertible Bonds or for any other period of time. The issued and fully paid-up share capital of the Company as at the date of this Announcement is US$202,884,829, comprising 1,252,079,674 Shares. The Company is of the opinion that it is not possible to quantify in any meaningful way the effect of the proposed Bonds Issue on the earnings of the Company and the Group until the proceeds of the proposed Bonds Issue have been fully deployed. Pending the deployment of the proceeds for the purpose stated in paragraph 7 Use of Proceeds of this Announcement, the proceeds may be placed in fixed deposits or invested in money market instructions as the Directors deem fit. The net effect on the earnings and earnings per Share will depend on the income earned from such deployment of the proceeds. 10. INTERESTS OF DIRECTORS AND CONTROLLING SHAREHOLDERS Save for Mr Harish Kumar Mittal (the Chairman and Non-executive Director of the Company and Executive Chairman of Mercator India), Mr Shalabh Mittal (the Managing Director and Chief Executive Officer of the Company), Mr Atul J. Agarwal (the Non-executive Director of the Company and Managing Director of Mercator India) and Mr Pushpatraj Shivlal Shah (the Non-executive Director of the Company and Director of Mercator International), and Mercator India and Mercator International (the controlling shareholders of the Company), none of the Directors or the controlling shareholders of the Company has any interest, direct or indirect, in the Bonds Issue. For and on behalf of Mercator Lines (Singapore) Limited Shalabh Mittal Managing Director and Chief Executive Officer 27 April

11 APPENDIX ILLUSTRATION OF FINANCIAL EFFECTS OF BONDS ISSUE Assumptions (a) (b) (c) (d) (e) Conversion Price is at S$ per Share The Convertible Bonds in aggregate principal amount of US$19 million are fully issued, and converted into Shares at the end of the financial year ended 31 March Issue expenses amount to approximately US$0.25 million. Exchange Rate is US$1.00 = S$ The equity and liability components of the Convertible Bonds are calculated based on valuation performed as at the date of this Announcement. Share Capital The Company 31 March 2011 Issued and paid up share capital (number of Shares) 1,252,079,674 Number of Conversion Shares arising from full conversion of Convertible Bonds 141,060,606 Enlarged share capital after full conversion of Convertible Bonds (number of Shares) 1,393,140,280 Conversion Shares/existing issued shares 11.27% Conversion Shares/enlarged issued shares 10.13% Net Tangible Assets The Group 31 March 2011 (US$ 000) After issue of the Convertible Bonds but before conversion NTA as reported 386,421 Estimated issue expenses 250 Adjusted NTA after issue of Convertible Bonds but before conversion 386,171 Adjusted NTA per Share after issue of Convertible Bonds but before conversion 0.38 (Singapore cents) After issue and conversion of the Convertible Bonds Adjusted NTA after issue of Convertible Bonds and conversion 405,171 Adjusted NTA per Share after issue of Convertible Bonds and conversion (Singapore 0.36 cents) Earnings The interest expense in respect of the Convertible Bonds prior to any conversion will be at the aggregate of 7.0 per cent. interest payable each year and the amortisation of the fair value of the conversion rights recorded on the date of issue. However, it is not possible to quantify the effects of the issue of the Convertible Bonds on the earnings of the Group until the proceeds from the issue of the Convertible Bonds have been deployed. 11

12 Gearing (in US$) The Group 31 March 2011 (US$ 000) Net borrowings (Excluding cash and bank balances) before issue of the Convertible 277,426 Bonds Decrease in net borrowings from the Convertible Bonds nil Net cash received after the issue of the Convertible Bonds 18,750 Net cash received after conversion of the Convertible Bonds nil Adjusted equity after issue of the Convertible Bonds but before conversion 386,171 Adjustment to equity after full conversion of the Convertible Bonds 19,000 Adjusted equity after conversion of the Convertible Bonds 405,171 Gearing (in Times) The Group 31 March 2011 Gearing 0.72 Gearing after issuance before conversion of the Convertible Bonds 0.77 Gearing after conversion of the Convertible Bonds