KLW suspends shares, must find new sponsor by March 31
As if a police investigation and potential listing-rule
breaches were not challenging enough, investors in Catalist-listed KLW Holdings
welcomed the new year with a trading suspension and the threat of delisting if
a new continuing sponsor is not found by March 31.
Comments
Kenneth Lim
05 January 2015
As if a police investigation and potential listing-rule breaches were not challenging enough, investors in Catalist-listed KLW Holdings welcomed the new year with a trading suspension and the threat of delisting if a new continuing sponsor is not found by March 31.
KLW suspended its shares early Monday after the company failed to find a replacement for SAC Capital, which said in October that it would stop being KLW's sponsor after Dec 31 because its initial assessment of the door maker was rendered inapplicable by changes to the company and a special audit.
In its suspension announcement, KLW said: "The incoming continuing sponsor has not completed its due diligence. The board will announce the appointment of a new continuing sponsor in due course."
It is not clear if the incoming sponsor has already agreed to accept KLW as a client before the due diligence is complete. Calls to KLW and its directors were unsuccessful.
KLW has until March 31 to find a continuing sponsor or risk mandatory delisting. Industry sources said that sponsors will typically take about two months to conduct due diligence before deciding whether to sponsor a client, although in more complex cases the time required for due diligence may be longer.
Only one other company, FM Holdings, has ever been suspended because it failed to secure a continuing sponsor since the Catalist's sponsor regime began in 2007, according to a spokesman at the Singapore Exchange. In FM's case, PrimePartners Corporate Finance cited at the time a lack of transparency and information from the company for the termination of its sponsorship.
KLW shareholders will find little comfort in FM Holdings, which delisted in October 2010 without making an exit offer because management reckoned that the company did not have enough cash to make a distribution. KLW's net asset value per share as at Sept 30, 2015, was 1.4 Singapore cents.
Monday's suspension was the latest blow for KLW, which has seen its stock price more than halve from 1.5 Singapore cents at the start of 2015 to 0.06 Singapore cent at the end of the year. The company in May 2015 announced that then-managing director Lee Boon Teck had entered into unauthorised commitments on certain projects and directed the company to pay S$16.2 million in commitment fees. The company is currently seeking to recover about S$7 million of those fees through a lawsuit.
A report by special auditor PwC found lapses in internal controls at KLW as well as potential breaches of listing disclosure rules.
The Commercial Affairs Department, Singapore's white-collar crime unit, has also interviewed some staff in an investigation into possible breaches of the Securities & Futures Act.