Chip Eng Seng has proposed a rights issue of 156.50 million rights shares at S$0.63 each to raise around S$98.6 million to pay for expansion plans, the company said in a filing to SGX Thursday.
The rights shares will be issued on the basis of one rights share for every four existing shares held by shareholders, the filing said.
The issue price is a discount of around 7.35 percent to the closing price of S$0.68 a share on Thursday, Chip Eng Seng said.
The company said that after considering its net gearing level, and comparing the 6 percent cost of borrowing, based on its three-year fixed rate notes issued in March, with the estimated cost of equity of around 5.88 percent, the rights issue appears to be a “more suitable funding solution.”
Around S$50 million of the net proceeds are earmarked to finance the possible expansion of the property development segment in Singapore and overseas, while around S$20 million is expected to finance possible strategic investments and/or acquisitions in the education segment, Chip Eng Seng said.
Around S$10 million is earmarked to finance growth and operations in the hospitality segment, with the balance to be tapped for general corporate purposes, the filing said.
To support the rights issue, controlling shareholders Celine Tang @ Chen Huaidan, Gordon Tan @ Tang Yigang, and Chia Lee Meng Raymond have all given irrevocable undertakings to subscribe for their full entitlement of rights shares, Chip Eng Seng said.
That would be for an aggregate 49.31 million rights shares, or around 31.51 percent of the total rights shares, the filing said.
The controlling shareholders have also agreed to subscribe for rights shares not taken up in the offering, the filing said.
Because the rights offering may result in the controlling shareholders’ stakes rising above the 30 percent threshold requiring a mandatory general offer for all of the company’s shares, Chip Eng Seng has sought and received a “whitewash waiver” from the Securities Industry Council of Singapore allowing them to forgo making the offer, the filing said.
Currently, Celine Tang and Gordon Tang have a joint direct interest of 26.98 percent in Chip Eng Seng, while Celine Tang has a deemed interest in another 2.75 percent, the filing said, adding Raymond Chia held a 1.78 percent direct interest.
Chip Eng Seng said it would seek shareholder approval at an extraordinary general meeting for the rights issue and the whitewash resolution.
UOB has been appointed manager and underwriter for the rights issue, the filing said.
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