Raffles Education proposes rights issue and placement of convertible bonds

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Raffles Education Corp. has proposed Tuesday a rights issue of convertible bonds of up to S$26.19 million and a placement to UOB Kay Hian of S$17.9 million.

Around 15 percent to 25 percent of the proceeds are earmarked for general working capital and the remainder will be used for the repayment of existing loans and interest, Raffles Education said in a filing to SGX.

Raffles Education’s board said the offering is in the company’s interest based on the terms of the convertible bonds and the funding certainty amid current volatile market conditions.

“The proceeds raised will be timely to supplement the group’s internally generated cash flow to meet its on-going financial obligations,” Raffles Education said. “The financial position of the group could be further strengthened in the event the convertible bonds were converted into equity, thus extinguishing its redemption obligation.”

The convertible bonds, which will be in denomination of S$1.00 each, will have a five-year maturity with a coupon of 6 percent per annum, the filing said. The bonds can be converted into shares any time on or after 60 days from the issued date through 10 days before the maturity date, the filing said.

Rights issue bonds

The issue price of the rights issue bonds is S$0.85, or 85 percent of the S$1.00 principal amount of each convertible bond, Raffles Education said. The conversion price for the bonds is S$0.065 a share, although the principal discount effectively prices the shares at S$0.055, or a discount of around 9.8 percent to the closing price of S$0.061 on Tuesday, the filing said.

The rights issue bonds will be offered to shareholders on the basis of 19 rights issue bonds for every 1,000 existing shares held, Raffles Education said.

Controlling shareholder, Chairman and CEO Chew Hua Seng, who holds 462.91 million shares, or an around 33.58 percent stake, plans to subscribe for his entitlement of the rights issue bonds and may take up additional bonds if there are excess, the filing said.

Placement bonds

For the bonds placed to UOB Kay Hian, the pricing is at the S$1.00 principal amount and the share conversion price is at S$0.065 each, marking a premium of around 6.6 percent to the closing share price Tuesday, the filing said.

UOB Kay Hian has confirmed it won’t convert the bonds in a way which would result in it holding more than 15 percent of Raffles Education’s enlarged capital, the filing said. If all of the placement and rights issue bonds are converted, UOB Kay Hian would held 13.4 percent of Raffles Education’s enlarged capital, the filing said.

The company obtained a mandate at its October annual general meeting (AGM) and won’t be seeking shareholder approval for the rights offering, the filing said.

Raffles Education said it would apply to list the bonds on SGX.