WEE POH HOLDINGS LIMITED WEE POH HOLDINGS LIMITED
- RE-CAPITALISATION PLAN INTRODUCTION In recent years, the construction industry has been significantly affected by the slowdown in the Singapore economy. As previously announced, the Company and its subsidiaries (the "Group"), like most other construction contractors in the market, are faced with a reduced volume of work, an extremely competitive bidding environment, weak profit margins and tight liquidity. On 30 September 2002, the Group had announced an unaudited proforma loss attributable to shareholders of the Company (the "Shareholders") of approximately S$17.6 million for the financial year ended 30 June 2002 ("FY2002"). The Group's current liabilities of about S$43.8 million as at 30 June 2002 comprise mainly bank overdrafts (S$11.9 million), unsecured trade creditors (S$15.1 million) and accruals (S$13.5 million). The Company is continuing its efforts to actively seek out new investors who are able to provide additional funding to support the Group's activities. At the same time, the concurrent measures, as detailed beneath, are being considered by the Directors to ease the cash flow of the Group and to facilitate future fund raising exercises. SOURCE FOR STRATEGIC INVESTOR The Directors have been working closely with UOB Kay Hian Pte Ltd ("UOBKH") and have mandated UOBKH to source for a suitable strategic investor who will help to strengthen the financial position of the Group and, possibly, provide it with new business opportunities. UOBKH is not providing any financial advice to the Company and its role is confined to that of procuring a strategic investor. CONCURRENT MEASURES The Directors have also been considering and working on a number of important concurrent measures. The rationale for these measures are to stabilize the Group's financial position in the short term and to pave the way for a suitable strategic investor to invest in the Company. These measures being considered include the following:- A. A capital reduction ("Capital Reduction") to reduce the par value of the Company's ordinary shares of S$0.20 each to S$0.005 each ("Shares") (see details below); B. A variation ("Scheme Variation") to be sought to the existing Scheme of Arrangement of 24 April 2002 ("SOA") for W&P Piling Pte Ltd ("WPP"), a subsidiary of the Company, such that creditors of the SOA will receive new Shares instead of cash repayments (see details below); C. A best effort conversion of amounts owing to trade creditors ("Best Effort Debt Conversion") by Wee Poh Construction Pte Ltd ("WPC"), a subsidiary of the Company, into new Shares (see details below); D. An evaluation of the going concern status of WP Conc-Pact Pte Ltd ("WCP"), a subsidiary of the Company, and which has total liabilities of approximately S$8.2 million and negative shareholders' funds of approximately S$0.7 million as at 30 June 2002 ("WCP Evaluation") (see details below); and E. Ongoing discussions with the Group's bankers to maintain its existing banking facilities ("Banking Arrangements") (see details below). A. THE CAPITAL REDUCTION As at the date of this Announcement, the Company has an issued and paid-up share capital of S$23,983,000 divided into 119,915,000 ordinary shares of S$0.20 each. The current share price of the Company as traded on the Singapore Exchange Securities Trading Limited ("SGX-ST") is significantly below its par value. To facilitate future fund raising exercises, the Company intends, subject to Shareholders' approval in general meeting, to undertake the Capital Reduction pursuant to Section 73 of the Companies Act (Cap. 50) (the "Act") to reduce the par value of its ordinary shares of S$0.20 each to Shares of S$0.005 each. The Capital Reduction is further subject to the approval of the High Court of Singapore. A circular to Shareholders to convene an Extraordinary General Meeting ("EGM") to seek Shareholders' approval for the Capital Reduction will be despatched in the immediate future. B. THE SCHEME VARIATION On 24 April 2002, WPP undertook the SOA under Section 210 of the Act with its creditors, of which the 1st of 4 cash instalments had already been successfully paid on 26 July 2002. WPP is proposing the Scheme Variation and intends to seek its creditors' approval to settle the 3 remaining cash instalments totaling approximately S$4.5 million with new Shares to be issued subsequent to the Capital Reduction. An application to the Court to convene a creditors' meeting for the purpose of considering the Scheme Variation will be made as soon as possible. The issue price of the new Shares to WPP creditors shall be S$0.05 per Share. This represents a discount of approximately 16.7% to the last traded price of S$0.06 on 7 November 2002. The issue of the new Shares will be subject to the approval of Shareholders at an EGM to be convened, the approval of the SGX-ST for the listing and the quotation of the new Shares and the lodgement of a Statement of Material Facts with the Monetary Authority of Singapore ("MAS"). C. THE BEST EFFORT DEBT CONVERSION WPC is proposing the Best Effort Debt Conversion to settle amounts owing to trade creditors of between S$2.0 million and up to S$4.0 million with new Shares to be issued subsequent to the Capital Reduction. The issue price of the new Shares to WPC creditors shall be S$0.05 per Share. This represents a discount of approximately 16.7% to the last traded price of S$0.06 on 7 November 2002. The issue of the new Shares will similarly be subject to the approval of Shareholders at an EGM to be convened, the approval of the SGX-ST for the listing and the quotation of the new Shares and the lodgement of a Statement of Material Facts with the MAS. It is proposed that the Scheme Variation and the Best Effort Debt Conversion shall be made inter-conditional. In other words, the Scheme Variation shall proceed only on the basis that the Best Effort Debt Conversion is proceeding and vice versa. D. THE WCP EVALUATION WCP is in the business of supplying ready-mixed concrete. For FY2002, WCP reported a net loss of approximately S$1.5 million. As at 30 June 2002, WCP had negative shareholders' funds of approximately S$0.7 million, total liabilities of approximately S$7.5 million, comprising amounts owing to unsecured trade and other creditors of S$5.6 million, amounts owing to related companies of the Group of S$1.9 million and amounts owing to hire purchase creditors of S$68,054. The hire purchase creditors as aforesaid are secured against the plant and machinery that were purchased under the hire purchase arrangements. None of these liabilities are guaranteed by the Company or any of the related companies of the Group. The Company is currently evaluating various possible options to restructure the current debts of WCP. The Company and WCP will make an announcement in due course after the conclusion of the WCP Evaluation. E. BANKING ARRANGEMENTS The Group is in discussion with its bankers to avail itself of the existing banking facilities, particularly in view of the Scheme Variation and the Best Effort Debt Conversion. MEMORANDUM OF UNDERSTANDING ENTERED INTO BETWEEN THE COMPANY AND MR TAY HUNG CHEOW TO ISSUE 1,600,000,000 NEW SHARES The Directors are pleased to announce that the Company has entered into a Memorandum of Understanding dated [8] November 2002 (the "MOU") with Mr Tay Hung Cheow ("THC") for the issue of 1,600,000,000 new Shares (the "Strategic Shares") at an issue price of S$0.005 ("the Strategic Price") to THC for a cash consideration of exactly S$8.0 million (the "Strategic Issue"). THC is a strategic investor that was introduced by UOBKH. The Strategic Shares shall be free from all liens, charges and encumbrances and shall rank pari passu in all respects with and carry all rights similar to the existing issued ordinary shares of the Company at the time of allotment and issue of the Strategic Shares. In the meantime, the Company and THC shall use their best endeavours to negotiate with a view to enter into a definitive strategic subscription agreement (the "Strategic Agreement") in respect of the Strategic Issue on or before 30 November 2002. When the Strategic Agreement is signed, THC will arrange for an amount of exactly S$8.0 million to be remitted to UOBKH to be held in escrow pending the completion of the Strategic Issue. PROPOSED PRINCIPAL TERMS OF THE STRATEGIC AGREEMENT AS CONTEMPLATED IN THE MOU The Directors and THC have taken into account the various concurrent measures such as the Capital Reduction, the Scheme Variation and the Best Effort Debt Conversion. They have also taken into account that, on a "willing buyer and willing seller" basis, THC is in-principle prepared, as provided in the MOU, to subscribe for 1,600,000,000 new Shares. The Directors are duly aware of the substantial dilution that the issue of the Strategic Shares would cause to existing Shareholders and to creditors of WPP and WPC who may be receiving new Shares pursuant to the Scheme Variation and the Best Effort Debt Conversion, respectively. Accordingly, the Directors have inserted several principal terms in the MOU to mitigate the adverse impact of such dilution. The principal terms are for the Company to propose a renounceable rights issue (the "Rights Issue") (see details below) to which the Strategic Shares would not be entitled; and for THC to offer for sale certain of his Strategic Shares on a non-renounceable basis for purchase by all other Shareholders (the "Preferential Offering") (see details below). Some Principal Terms Under the MOU, the Company and THC further acknowledge that the Strategic Agreement when executed shall provide, inter alia, for the following:- a) the Company shall, further to the completion of the Capital Reduction, undertake the Rights Issue of no more than 3 rights Shares ("Rights Shares") for every 2 Existing Shares and such Rights Shares shall be issued at the Strategic Price (and for this purpose, "Existing Shares" shall mean the Shares existing after the completion of the Capital Reduction including the WPP Shares and the WPC Shares (see details below); b) THC shall agree that the Strategic Shares shall not be entitled to the Rights Issue; and c) THC shall undertake the Preferential Offering on the basis of 1 Strategic Share for every 2 Existing Share at the Strategic Price. Conditions Precedents Under the MOU, the Company and THC intend that the Strategic Agreement shall provide, inter alia, that the Strategic Issue shall be conditional upon the following conditions precedent being fulfilled or satisfied:- a) the approval in-principle of the SGX-ST being obtained for the Strategic Issue and the listing and quotation of the Strategic Shares upon their allotment and issue and all conditions set out in such approval being satisfied; b) the approval of the Shareholders in general meeting being obtained for the Strategic Issue and the allotment and issue of the Strategic Shares in favour of THC or his nominee; c) the receipt of the whitewash waiver (the "Whitewash Waiver") from the Securities Industry Council ("SIC") in respect of THC's obligation to make a mandatory general offer arising from or in connection with the Strategic Issue and the Shareholders passing a resolution (the "Whitewash Resolution") in favour of such Whitewash Waiver and where such Whitewash Waiver is granted by the SIC subject to any conditions, that such conditions are acceptable to the Company and THC; d) the results of due diligence to be conducted by THC on the Company being satisfactory to THC; e) the completion by the Company of the Capital Reduction to reduce the par value of the Company's existing ordinary shares of S$0.20 each to Shares of S$0.005 each; f) the creditors of WPP agreeing to accept, pursuant to the Scheme Variation, the issue of new Shares (the "WPP Shares") as satisfaction of debts owing by WPP of approximately S$4.5 million which are otherwise payable in the 3 remaining instalments under the SOA; and g) the creditors of WPC agreeing to accept, pursuant to the Best Effort Debt Conversion, the issue of new Shares (the "WPC Shares") as satisfaction for part of the debts owing by WPC of at least S$2.0 million and up to a maximum of S$4.0 million. Notwithstanding the MOU, the Company and THC acknowledge that the details of the Strategic Issue, the Capital Reduction, the Scheme Variation, the Best Effort Debt Conversion, the Rights Issue and the Preferential Offering (collectively, the "Transactions") are subject to changes. PROPOSED WAIVER FOR THC TO MAKE A GENERAL OFFER FOR THE COMPANY In the event of completion of the Strategic Issue and, the allotment and issue of the WPP Shares and WPC Shares, THC is expected to own in excess of 30% of the enlarged share capital of the Company. Pursuant to Rule 14 of the Singapore Code on Take-overs and Mergers (the "Code"), THC will then be required to make a general offer (the "General Offer") for all the issued and paid-up share capital of the Company not already owned, controlled, agreed to be acquired by him or any other party acting in concert with him. However, THC intends to make an application to the SIC to obtain the Whitewash Waiver. Conditional on the Whitewash Waiver being obtained by THC from the SIC, the Company will proceed to obtain Shareholders' approval for the Whitewash Resolution. Shareholders should note, in particular, that Shareholders' approval for the Strategic Issue is conditional upon the Whitewash Resolution being approved by Shareholders at a general meeting. If Shareholders' approval is not obtained in general meeting for the Whitewash Resolution, the Strategic Issue will not take place. SHAREHOLDERS' UNDERTAKINGS FOR THE PROPOSED RIGHTS ISSUE The major Shareholders, namely Messrs Chew Yin What and Lee Kok Swee, who in aggregate own 40,563,338 ordinary shares of S$0.20 each representing approximately 33.8% of the existing share capital of the Company as at the date of this Announcement, intend to provide irrevocable undertakings to subscribe for each of their entitlements under the Rights Issue. At this point in time, the Company does not plan to arrange for any underwriting for the Rights Issue. CAUTION TO BE EXERCISED ON THE TRADING OF SHARES The Directors wish to caution Shareholders that at the present moment, there is no certainty or assurance that any of the Transactions would be successfully completed. The Directors, with the assistance of UOBKH, shall be using their best endeavours to enter into the Strategic Agreement with THC on or before 30 November 2002. To the extent possible, the Company shall be pursuing with the other measures including but not limited to the Capital Reduction, Scheme Variation, Best Effort Debt Conversion, WCP Evaluation and the Banking Arrangements. Meanwhile, Shareholders should exercise due caution in buying or selling shares of the Company on the SGX-ST. ILLUSTRATIVE PROFORMA FINANCIAL EFFECTS AND ILLUSTRATIVE SHAREHOLDING COMPOSITION Financial Effects For illustration purposes only, the financial effects set out beneath are based on the following assumptions:- a) the total amount of debts restructured is S$6.5 million, pursuant to the Scheme Variation of S$4.5 million and a minimum Best Effort Debt Conversion of S$2.0 million; b) the cash consideration pursuant to the Strategic Issue is S$8.0 million; c) the basis of the Rights Issue is 3 Rights Shares for every 2 Existing Shares; and d) the basis of the Preferential Offering is 1 Strategic Share for every 2 Existing Shares. The financial effects of the Transactions on the share capital of the Company, net tangible assets ("NTA") and the gearing of the Group are based on the unaudited proforma financial statements of the Group for FY2002 and on the assumption that the Transactions are completed as at 30 June 2002. The financial effects of the Transactions on the earnings of the Group are based on the unaudited proforma financial statements of the Group for FY2002 and on the assumption that the Transactions are completed as at 1 July 2001. Share Capital  Earnings .gif) NTA  Note:- (1) Based on the NTA immediately after the completion of the Transactions before accounting for any expenses relating to the Transactions. Gearing  Note:- For the purposes of the above calculation, "Gearing" means the ratio of total borrowings to Shareholders' Funds. "Total Borrowings" means the aggregate borrowings from banks and financial institutions including finance leases and "Shareholders' Funds" means the aggregate amount of issued and paid-up share capital, share premium, retained earnings/accumulated losses, and translation reserve. Shareholding Composition
INTERESTS OF DIRECTORS AND SUBSTANTIAL SHAREHOLDERS Save for the Capital Reduction, the Rights Issue and the Preferential Offering, none of the Directors and substantial Shareholders has any interest, direct or indirect, in the Strategic Issue, the Scheme Variation and the Best Effort Debt Conversion. PROPOSED EXTRAORDINARY GENERAL MEETING The Company will be convening an EGM to seek Shareholders' approval for the Transactions contemplated under the Strategic Agreement. A circular containing further details of the Transactions will be despatched to the Shareholders in due course. PROSPECTS OF THE GROUP In the Group's full-year results announcement on 30 Sep 2002, it was stated that, "management expects that the Group shall be presented with more opportunities than in the past few years". This was attributable in part to the fact that "many small to medium sized (construction) companies (will) be displaced from the scene" and "coupled with the re-grading (to a lower grade) of the remaining (construction) companies by the Building and Construction Authority of Singapore". During the year, the Group adopted cost control measures and close monitoring of project costs. As a result of these measures and insofar as the Group can secure new projects, the Management expects the Group's performance and results to improve as compared to the substantial losses for FY2002. However, the Management wishes to caution that any undue delay that the Group takes to resolve its current funding difficulties can potentially weaken and adversely affect its performance and results for the current year. A major effect would be to slow down or hinder its ability to secure jobs. Accordingly the Directors are of the opinion that time is of the essence. The Transactions set out in this Announcement are matters to be pursued with urgency. DIRECTORS' 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, the facts stated and opinions expressed in this Announcement are fair and accurate in all material aspects as at the date hereof, and that there are no material facts the omission of which would make this Announcement misleading. Submitted by LEE KIAT SENG, Company Secretary on 08/11/2002 to the SGX Next Annc Prev Annc
2 Shenton Way, #19-00 SGX Centre 1, Singapore 068804. Tel: (65) 6236 8888 Fax: (65) 6535 6994 | ||||||||||||||||||||||||||||||||
