KUALA LUMPUR: Lion Corp Bhd major shareholder Tan Sri William Cheng Heng Jem will not see a significant reduction in his shareholding even if Lion Corp’s proposal to issue 950 million new shares to its creditors goes through.
If the share issuance takes place, Cheng’s stake in Lion Corp will be reduced marginally, to 74.26% from 77.35%.
According to an industry observer, while the stakes of the existing major shareholders of Lion Corp will not be adversely affected, minority shareholders in the company will be.
Minority shareholders will be subject to essentially an 80% haircut in the form of a five-into-onecapital reduction scheme.
The creditors, who are mainly companies within the Lion group, will be issued new shares at full par value of RM1 after the capital reduction scheme.
Lion Corp’s share price fell by 5.3% or 1 sen to 18 sen yesterday. Its stock has traded between a 52-week high of 42 sen in July and a low of 16.5 sen in September. Year-to-date, its stock has fallen by 32.1%.
Lion Corp last Friday proposed a settlement scheme involving the issuance of 950 million new shares in Lion Corp to settle RM950 million of debt owed by its 79%-owned subsidiary, Megasteel Sdn Bhd.
The settlement scheme would also involve a deferred cash payment of 20 sen for every RM1 of the overdue amount.
Lion Corp said the source of funding for the deferred cash payment would be from a proposed investment by new investors in steelmaking companies within Lion Corp and its related companies, Lion Diversified Holdings Bhd and Lion Industries Corp Bhd.
However, Lion Corp said in the event that the proposed investment does not materialise, Megasteel will seek alternative forms of funding such as internally-generated funds or fundraising exercises that may include the realisation of certain assets or investments in the Megasteel group.
Before the issuance of the 950 million new shares and deferred cash payment of 20 sen, Lion Corp will undertake a capital reduction exercise, where its existing shares of RM1 par value will be reduced to 20 sen each by the cancellation of 80 sen.
Lion Corp said as at Dec 1, 2011, its existing issued and paid-up capital of RM1.901 billion, comprising 1.901 billion shares of RM1 par value, will be reduced to RM380 million comprising 1.901 billion shares of 20 sen par value each.
The company said the 80 sen reduction will give rise to a credit of RM1.521 billion which would be utilised to reduce Lion Corp’s group accumulated losses of RM1.699 billion for FY11 ended June.
After the capital reduction, Lion Corp’s issued and paid-up capital will be consolidated on the basis of five shares of 20 sen each into one share of RM1, and thereafter the new shares for the debt settlement scheme will be issued.
This article appeared in The Edge Financial Daily, December 6, 2011.
If the share issuance takes place, Cheng’s stake in Lion Corp will be reduced marginally, to 74.26% from 77.35%.
According to an industry observer, while the stakes of the existing major shareholders of Lion Corp will not be adversely affected, minority shareholders in the company will be.
Minority shareholders will be subject to essentially an 80% haircut in the form of a five-into-onecapital reduction scheme.
The creditors, who are mainly companies within the Lion group, will be issued new shares at full par value of RM1 after the capital reduction scheme.
Lion Corp’s share price fell by 5.3% or 1 sen to 18 sen yesterday. Its stock has traded between a 52-week high of 42 sen in July and a low of 16.5 sen in September. Year-to-date, its stock has fallen by 32.1%.
Lion Corp last Friday proposed a settlement scheme involving the issuance of 950 million new shares in Lion Corp to settle RM950 million of debt owed by its 79%-owned subsidiary, Megasteel Sdn Bhd.
The settlement scheme would also involve a deferred cash payment of 20 sen for every RM1 of the overdue amount.
Lion Corp said the source of funding for the deferred cash payment would be from a proposed investment by new investors in steelmaking companies within Lion Corp and its related companies, Lion Diversified Holdings Bhd and Lion Industries Corp Bhd.
However, Lion Corp said in the event that the proposed investment does not materialise, Megasteel will seek alternative forms of funding such as internally-generated funds or fundraising exercises that may include the realisation of certain assets or investments in the Megasteel group.
Before the issuance of the 950 million new shares and deferred cash payment of 20 sen, Lion Corp will undertake a capital reduction exercise, where its existing shares of RM1 par value will be reduced to 20 sen each by the cancellation of 80 sen.
Lion Corp said as at Dec 1, 2011, its existing issued and paid-up capital of RM1.901 billion, comprising 1.901 billion shares of RM1 par value, will be reduced to RM380 million comprising 1.901 billion shares of 20 sen par value each.
The company said the 80 sen reduction will give rise to a credit of RM1.521 billion which would be utilised to reduce Lion Corp’s group accumulated losses of RM1.699 billion for FY11 ended June.
After the capital reduction, Lion Corp’s issued and paid-up capital will be consolidated on the basis of five shares of 20 sen each into one share of RM1, and thereafter the new shares for the debt settlement scheme will be issued.
This article appeared in The Edge Financial Daily, December 6, 2011.
