KUALA LUMPUR: Magna Prima Bhd plans to raise RM40 million through an offer of new redeemable convertible preference shares (RCPS) to Lembaga Tabung Angkatan Tentera (LTAT) to fund its property development projects.
In a filing with Bursa Malaysia yesterday, Magna Prima said that it has entered into a conditional subscription agreement with LTAT for 40 million new RCPS at an issue price of RM1 each.
In the event that LTAT chooses to fully convert all the RCPS into new Magna Prima shares, Magna Prima’s share base will increase to 375.0 million from 332.9 million currently. A full conversion will see LTAT become a substantial shareholder in Magna Prima, with an 11.23% equity interest.
“The RCPS will be issued at the issue price [of RM1], which is fixed at a premium of 99 sen above the par value of 1 sen per RCPS,” said the developer of integrated lifestyle themed property projects, adding that the issue price was arrived at after negotiations with LTAT.
It said the issue price is justified after taking into consideration the illiquidity of RCPS, which will neither be tradable nor transferable, as well as the limited voting rights attached to the RCPS.
Magna Prima intends to use the funds for its property development projects (RM38 million), general working capital (RM1.6 million) and defrayment of expenses in relation to the exercise (RM400,000). The group’s projects are the Istana project, the Boulevard Business Park development project and the Desa Mentari development project.
Magna Prima and LTAT will open a joint account in the name of Magna Prima and RM46.4 million of net sales proceeds of the Istana project would be channelled into the joint account, within three months from the date of the subscription agreement, or by a mutually agreed date.
Depending on the holding period of the shares, the conversion price of each unit of the RCPS ranges from a 5% to 10% discount to the five-day volume weighted average market price of Magna Prima shares up to and including the date of the notice to convert.
“The conversion price of the RCPS shall not in any event be lower than the par value of the Magna Prima shares of 25 sen each,” it added.
The RCPS shall carry the right to receive a fixed preferential dividend at the rate of 16% per year, to be paid upon its redemption.
Should Magna Prima fail to pay the redemption price and the dividend on its due date, it will pay LTAT interest at the rate of 8% per year.
Magna Prima also proposed an increase in its authorised share capital to RM125.4 million comprising 500 million shares and 40 million RCPS, from RM100 million comprising 400 million shares of 25 sen each.
Magna Prima shares closed 2.5 sen lower at 99.5 sen yesterday, 9.5% lower from a month ago. Its market capitalisation stood at RM331.23 million.
This article first appeared in The Edge Financial Daily, on August 12, 2014.
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