NOVA MSC BERHAD
16 Oct 2017
The Board of Directors of Nova MSC Berhad (the “Company”) wishes to announce that its subsidiary company, CNA Development Pte Ltd, (“Issuer “or “CNAD”) has on 16 Oct 2017 entered into a bond subscription agreement (the “Subscription Agreement”) with Japan Asia Group Limited (“Subscriber”) Under the terms of the Subscription Agreement, CNAD has agreed to issue, and Subscriber has agreed to subscribe and pay for, S$4,000,000 in aggregate principal amount of redeemable convertible bonds (the “Bonds”) on or before 16 Jan 2018 which is the completion date for the issue and subscription of the Bonds (the “Completion Date”). The Bonds will be issued at an issue price of 100% of the principal amount thereof, and are convertible into fully paid ordinary shares of CNAD at the option of the Subscriber thereof.
Purpose of the Issue
The estimated net proceeds from the issue of the Bonds are approximately S$4,000,000. It is intended that the proceeds of the issue of the Bonds be used for working capital expenditure purposes in connection with its present and future projects related implementation. The amount are mainly for third party project-related professional services to be engaged by CNAD and is an estimate as the detailed breakdown is not determinable at this point in time as these transactions relate to the future and are still subject to further negotiation.
Salient Terms and Conditions of the Bonds
Other salient terms and conditions of the Bonds are summarised as follows:
Each Bond shall bear simple interest on the principal amount then outstanding at the rate of 3% per annum for the 1st year, 4% per annum for the 2nd year and 5% per annum for the 3rd year, such interest to accrue from the Issue Date up to and including the Early Redemption Date or the Maturity Date (as the case may be) and be payable without demand at the end of each Interest Period (the “Interest Due Date”). The duration of each interest period (the “Interest Period”) shall be six (6) months.
Payment of Subscription Price
The Subscriber shall, on the Completion Date, pay or remit the aggregate subscription price in full in respect of the Bonds being issued on the Completion Date to the Issuer, by way of electronic transfer to the Issuer’s bank account as payment for the subscription of such Bonds.
Nature of Obligation
The Bonds shall constitute direct, unsubordinated, unconditional and unsecured obligations of the Issuer and shall at all times rank pari passu and without any preference or priority with all the Issuer’s other present and future unsecured and unsubordinated indebtedness.
It is the date falling thirty six (36) months from the Completion Date.
Subscriber shall have the right (“Conversion Right”) by giving the notice in writing to the CNAD to convert its Bond into new shares (“Conversion Shares”) of the CNAD, at any time up to, and including, the close of business on the Maturity Date.
The Conversion Shares shall be issued as fully-paid and shall be free from all encumbrances, freely transferrable, rank pari passu with the other shares then outstanding and with the benefit of all rights, benefits and entitlements attaching thereto as of the date of conversion and thereafter.
The price per Conversion Share at which the Bonds will be converted (“Conversion Price”) shall be based on a valuation to be agreed between the Parties when Subscriber exercises its Conversion Right. In the event that the Issuer undertakes an initial public offering (“IPO”)** on the Main Board or the Catalist of the SGX-ST, the Conversion Price shall be equivalent to the offer price for the IPO Shares. The conversion ratio shall be such that the Bondholder shall receive S$1.30 equivalent of Conversion Shares for every S$1.00 in principal amount of the Bonds (“Conversion Ratio”). The Conversion Ratio was negotiated between CNAD and the subscribers, and was arrived at on a willing-seller willing-buyer basis.
Redemption before Maturity
The Bondholder may, at its option, require the Issuer to redeem the Bonds, by providing at least ten (10) days’ prior written notice (the “Redemption Notice”) to the Issuer (which notice shall specify the date of the redemption of the Bonds, which shall be a Business Day falling no less than fifteen (15) days after the date of the Bondholder’s Redemption Notice (the “Early Redemption Date”)) if there is any Change of Control* in the Issuer and/or the Issuer decides not to undertake an IPO on the Main Board or the Catalist of the SGX-ST**.
* “Change of Control” means an occurrence where any person or persons acting in concert acquires control of the Issuer, where “control” means (i) an acquisition or control of shares representing more than fifty (50) percent of the total number of voting rights in the Issuer at such time, or (ii) the right to appoint or remove all or the majority of the Directors;
** As at the date of this announcement, there is no firm plan for an IPO of CNAD. The Group will, from time to time, explore opportunities complementary to the Group’s business, including engaging in discussions with prospective parties in fund raising and others. However, such discussion may not result in any definitive agreements whatsoever been signed. The Company will make proper disclosure of its corporate exercises in accordance with the listing requirements at appropriate times.
Upon receipt of the Redemption Notice, the Issuer shall on the Early Redemption Date redeem and repay all (and not some only) of the Bonds then outstanding at 100% of their principal amount, together with all accrued and unpaid interest that was scheduled to be paid up to (and including) the Early Redemption Date. Partial redemption of the Bonds shall not be allowed in the case of an early redemption before the Maturity Date.
Redemption at Maturity
If, by the Maturity Date, the Bonds have not been converted into Conversion Shares (and the Bondholder has not notified the Issuer in writing of its intent to convert the Bonds into Conversion Shares on the Maturity Date), the Issuer shall on the Maturity Date (or the next Business Day, if the Maturity Date does not fall on a Business Day), and without demand, redeem and repay all of the Bonds then outstanding at 100% of their principal amount, together with all accrued and unpaid interest up to the Maturity Date.
Background on CNAD
CNAD is a 51% owned subsidiary of the Company. Its principal business are those relating to the provision, design and implementation of integrated control and automation systems and information technology solutions for buildings and facilities and the provision of engineering maintenance services. Based on CNAD’s latest audited financial statements for financial year ended 31 March 2017, CNAD has a net profit of S$ 522,066 and net assets of S$2,920,054.
Financial Effect of the Issuance
The issuance will not have any effect to the issued and paid-up capital of the Company as well as its substantial shareholders’ shareholding and is not expected to have a material effect on the earning and net assets of the Company and the Group for the financial year ending 31 March 2018. The issuance will increase the Group’s gearing ratio from 0.04 as at 31 March 2017 to 0.43.
Highest Percentage Ratio
The highest percentage ratio is calculated based the proceeds from the aggregate value of issuance of approximately RM9.6 million over the net asset of the Group for the latest audited consolidated financial statements of Company for financial year ended 31 March 2017 amounting to RM48.6 million of 19.7%.
Save for the approval of the shareholders of CNAD, the issuance is not subjected to any other approvals including, the approval of the shareholders of the Company and any relevant regulatory authorities in Malaysia or Singapore.
Directors and Major Shareholder’ Interest
None of the other directors and/or major shareholders of the Company or persons connected to the directors and/or major shareholders of the Company have any interest, direct or indirect in the above transaction.
The Board, after having considered all aspects of the issuance, including the basis and justification of arriving at the coupon rate, rationale, prospects, risk factors and financial effects, is of the opinion that the issuance are in the best interest of the Company and the Group and the terms and conditions in the Bond subscription agreement are fair and reasonable.
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