Magnus to issue S$15m more of convertibles
Magnus Energy plans to tap the final S$15 million of a
controversial convertible bond deal, and its new major shareholder was introduced
by a director of a company in which Magnus is raising its stake, Magnus chief
executive Luke Ho said on Friday.
Comments
Kenneth Lim
30 April 2016
Magnus Energy plans to tap the final S$15 million of a controversial convertible bond deal, and its new major shareholder was introduced by a director of a company in which Magnus is raising its stake, Magnus chief executive Luke Ho said on Friday.
Mr. Ho made those comments at a contentious extraordinary general meeting (EGM) in which a group of minority shareholders failed to oust the current directors. In a poll vote, about 29 per cent of the shares present supported, and about 71 per cent were against, proposals to replace the four current directors with nominees of the minority shareholders.
There were occasional bouts of shouting and name calling between shareholders from both sides of the issue, as well as pleas for the directors to do more.
Lawyer Lim Chee San, who was one of three director nominees by the minority shareholders, repeatedly asked the board to explain why it had to take on highly dilutive convertible financing when its core subsidiary had sufficient funding.
Magnus chairman Kushairi bin Zaidel told investors that it was difficult for the company to raise money in other ways, and Magnus needed the cash so that it could make further investments and avert an erosion of the stock.
But even Mr. Kushairi was confused at times about the details of the convertibles, which carry a structure colloquially known as “death spiral” because of their substantial dilutive effect on the underlying stock. Mr. Kushairi wrongly asserted during the meeting that Magnus was contractually bound to issue the final S$15 million of the S$35 million convertible deal. Mr. Ho and Mr. Lim then corrected him; the issuance of the last tranche is Magnus's choice.
Mr. Ho told shareholders that the company has “plans to draw down” that last S$15 million.
The minority shareholders, who had requisitioned the meeting in March, had been expecting to lose their bid after Malaysian businessman and politician Lee Chin Cheh emerged as a 25 per cent shareholder on Monday. Mr. Lee, who bought a 22 per cent stake from the fund that held the Magnus convertibles, had told Mr. Ho that he supported the current board and management. Mr. Lee has, however, kept mum on his plans for the company.
When asked how Mr. Lee came into the picture, Mr. Ho said that he had been introduced to Mr. Lee in the past “couple of months” by Magnus minority shareholder Mohammed Wira Dani bin Abdul Daim.
“I spoke to Dato Wira ... a former controlling shareholder of the company. I said to him, well, we need some investors and we need some supporting shareholders. So he introduced Mr. Lee Chin Cheh,” Mr. Ho said.
After the meeting, Mr. Ho clarified to The Business Times that it was a “casual” introduction.
Mr. Wira is also a director of GCM Resources, a coal exploration company listed on London's AIM.
On Thursday, Magnus announced that it had agreed to pay £510,000 (S$1 million) in cash for convertibles issued by GCM that would raise Magnus's stake in GCM from about 15 per cent to about 21 per cent if converted.