KIN DON HOLD<0208> - Announcement
The Stock Exchange of Hong Kong Limited takes no
responsibility for the contents of this announcement,
makes no representation as to its accuracy or
completeness and expressly disclaims any liability
whatsoever for any loss howsoever arising from or in
reliance upon the whole or any part of the contents of
this announcement.
Kin Don Holdings Limited
(Incorporated in the Cayman Islands with limited
liability)
PROPOSED ISSUE OF US$5,000,000 3%
CONVERTIBLE DEBENTURES DUE 2003
The directors of the Company are pleased to announce that
on 21 January 2000, the Company entered into the
Subscription Agreement with the Subscriber. Pursuant to
the Subscription Agreement, the Company has agreed to
issue and the Subscriber has agreed to subscribe for
US$5,000,000 (approximately HK$38,850,000) 3%
convertible debentures due 2003. The Debentures, when
issued, will carry the right to convert into Shares of
the Company at the Conversion Price as mentioned below.
The Debentures bear interest at 3% per annum payable
semi-annually in arrears on 30 June and 31 December in
each year with the first interest payment date falling
on 30 June 2000. The subscription and issue of the
Debentures is conditional upon, among other things, the
shareholders of the Company approving the issue of the
Debentures and the issue and allotment of Shares upon the
exercise of the Conversion Rights and the Stipulated
Price on the Completion Date being more than HK$0.12 per
Share.
The net proceeds from the issue of the Debentures are
estimated to amount to approximately HK$35,800,000 and
are intended to be used for the outstanding repayment of
the loan and interest accruing under Silver Galaxy
Agreement for the partial payment of the subscription
price and shareholder's loan under the Shareholders'
Agreement and any remaining balance as working capital.
THE SUBSCRIPTION AGREEMENT DATED 21 JANUARY 2000
Issuer:
The Company
Subscriber:
The Subscriber is an investment holding company for
private investment funds. The beneficial owners of the
Subscriber, its directors and managers and their
respective associates (as defined in the Listing Rules)
are independent third parties not connected with the
directors, chief executive, substantial shareholders of
the Company or its subsidiaries or any of their respective
associates (as defined in the Listing Rules).
Principal amount of Debentures:
The principal amount of the Debentures is US$5,000,000.
Each of the debentures has a denominated value of
US$50,000.
Subscription of the Debentures:
The subscription of the Debentures is conditional upon,
among other conditions:D
(a) the passing of an ordinary resolution by the
shareholders of the Company at an EGM approving the issue
of the Debentures and the issue and allotment of Shares
upon exercise of the Conversion Rights attaching to the
Debentures;
(b) the Listing Committee of the Stock Exchange having
granted listing of and permission to deal in the Shares
to be issued upon the exercise of the Conversion Rights;
(c) none of the warranties made by the Company under the
Subscription Agreement having been breached in any
material respect (or, if capable of being remedied, has
not been remedied), or is misleading or untrue in any
material respect;
(d) the delivery by the Company to the Subscriber of a
legal opinion addressed to the Subscriber from the
Company's Hong Kong and Cayman Islands lawyers, in an
agreed form, covering such matters including the legality,
validity and enforceability of the Subscription Agreement under the
laws of Hong Kong and the Cayman Islands; and
(e) the Stipulated Price on the Completion Date being more
than HK$0.12 per Share.
Completion of the subscription of Debentures is expected
to be on the Completion Date. If the conditions are not
fulfilled (or waived by the Subscriber) within 45 days
from the date of the Subscription Agreement, the
obligations of the parties in respect of the Debentures
will lapse.
OTHER PRINCIPAL TERMS OF THE DEBENTURES
Nature:
Unsecured general obligations.
Conversion Period:
The Debentures may, subject to the terms of the
Subscription Agreement, be converted into Conversion
Shares from the 45th day after the date of issue up to
4:00 p.m. on 31 December 2003.
Conversion Price:
The Conversion Price for the Debentures is:
(i) 130% of the average closing price per Share quoted on
the Stock Exchange over the 20 consecutive trading days
prior to the Completion Date; and
(ii) if the Average is less than the price determined
in accordance with paragraph (i) above, the higher of:
(a) 88% of the Average; or
(b) the Stipulated Price.
The existing issued share capital of the Company
comprises 626,500,000 Shares.
For reference purpose, assuming that the Conversion Price
is equal to the closing price per Share of HK$0.34 quoted
on the Stock Exchange as at 21 January 2000, 114,264,706
Shares would be issued upon Conversion, representing
approximately 18.24% of the existing issued share capital
of the Company and approximately 12.03% of its enlarged
issued share capital, assuming that such Conversion will
take place after the new issue of Shares pursuant to the
Silver Galaxy Agreement and the Placing. As mentioned in
the Company's announcement dated 3 January 2000, Silver
Galaxy has elected to convert half of the principal amount
of the loan of HK$42,000,000 and accruing interest into
new Shares pursuant to the Silver Galaxy Agreement. The
Company has entered into two placing agreements for the
Placing of up to 150 million Shares as mentioned in its
announcement dated 15 January 2000. Immediately after
completion of the Placing (on the assumption that all the
150 million placing shares are successfully placed), the
new issue of Shares to Silver Galaxy pursuant to the Silver
Galaxy Agreement and the Conversion, the shareholdings
of Keen Intelligence, Glowing Bless and Mr Au, being the
controlling shareholders of the Company, would be reduced
as follows:
Approximate percentage of the enlarged issued share
capital of the Company
Existing Upon completion Upon the Upon the
of the Placing issue to Silver Galaxy Conversion
Keen Intelligence (Note 1)
39.98% 32.26% 29.97% 26.37%
Glowing Bless (Note 2)
2.19% 1.77% 1.65% 1.45%
Mr Au (personal)
2.23% 1.80% 1.68% 1.47%
Silver Galaxy (Note 3)*
- - 7.08% 6.23%
Debenture holders*
- - - 12.03%
Public* 55.60% 64.17% 59.62% 52.45%
------------------------------------------------------------
100% 100% 100% 100%
============================================================
Note 1. Keen Intelligence owns 250,500,000 Shares. Mr
Au and Ou Tong De are the beneficial owners of 92% and
8% of the issued share capital of Keen Intelligence
respectively.
Note 2. Glowing Bless owns 13,750,000 Shares. Mr Au is
the sole beneficial shareholder of Glowing Bless.
Note 3. Silver Galaxy is wholly and beneficially owned
by a private investment fund established in the Cayman
Islands, and is an independent third parry not connected
with any of the directors, chief executive or substantial
shareholders of the Company or its subsidiaries or any
of their respective associates (as defined in the Listing
Rules).
* These are/will be public shareholders.
The directors of the Company will ensure that there will
be a minimum 25% public float of the Shares after the
Placing, the issue of new shares to Silver Galaxy and any
conversion under the Debentures.
Fraction of Shares upon conversion:
Fractions of Shares will not be issued on conversion but
(except in cases where any such cash payment would amount
to less than HK$100) an equivalent cash payment in Hong
Kong dollars will be made to the Debenture holder in
respect of such fraction.
Limitation to conversion:
No Shares will be issued below the par value of HK$0.10
per Share. In the event that the Conversion Price falls
below the par value, the Company is required to redeem
the principal amount of the Debentures purported to be
converted at 115% of the face value together with interest
accrued on the tenth business day after the service of
a conversion notice. Up to 50% of the Debentures can be
converted by the Subscriber during any 30 days' period.
Interest:
3% per annum payable semi-annually in arrears on 30 June
and 31 December in each year, the first interest payment
date will fall on 30 June 2000. Interest will be paid out
of the Company's working capital. The directors of the
Company consider that such level of interest would not
have any material effect on the cash flow of the Company.
Maturity:
On the Maturity Date, any outstanding Debentures will be
mandatorily converted into Shares provided that the
maximum outstanding principal amount of the Debentures
that can be mandatorily converted will be up to the amount
such that the Shares to be converted therefrom together
with the Conversion Shares that are held by the Debenture
holder will not trigger the mandatory general offer
obligation for the Debenture holder and parties acting
in concert with it under the Hong Kong Code on Takeovers
and Mergers. Any outstanding Debentures that cannot be
so mandatorily converted into Shares will be redeemed by
the Company at a redemption amount equal to 130% of such
outstanding Debentures together with accrued interest.
Redemption:
In the event that the closing price of the Shares falls
to the Stipulated Price or less for a period of ten
consecutive trading days, the Company may, by notice,
redeem the Debentures (or part thereof). If the
redemption notice is served during the period from day
1 to day 120 after the issue of the Debentures, or from
day 121 to day 240 after such issue date or from day 241
to day 360 after such issue date or from day 361 to day
480 after such issue date or from day 481 and thereafter,
the redemption amount will be 110%, 115%, 120%, 125% and
130% respectively of the principal amount of the
Debentures to be so redeemed together with accrued
interest.
In the event that the closing price of the Shares falls
to the Stipulated Price or less for a period of ten
consecutive business days, the Debenture holder may
require the Company to redeem the Debenture (or part
thereof) at 115% of the face value together with accrued
interest.
Upon the occurrence of an event of default provided in
the Subscription Agreement, the Debenture holders
holding a majority in value of the outstanding Debentures
may require the Company to redeem the whole (but not part)
of the outstanding principal amount of the Debentures at
a redemption amount equal to 115% of such outstanding
principal amount together with accrued interest.
Status:
The Conversion Shares will, when allotted and issued,
rank pari passu with all other Shares in issue on the date
of conversion in all respects.
Listing:
The Debentures will not be listed on the Stock Exchange
or any other stock exchange. An application will be made
to the Stock Exchange for the listing of, and permission
to deal in, the Conversion Shares.
Transferability:
The Debentures may only be assigned or transferred in
whole or in part (in whole multiples of US$50,000) of its
outstanding principal amount to (a) an associate of the
Subscriber on terms that if such transferee ceases to be
an associate of the Subscriber, it will have to transfer
the Debenture to another associate of the Subscriber; (b)
one or more funds with which the Subscriber is affiliated
or has management agreements and (c) such other
transferee as may be consented to in advance by the Company
(such consent not to be unreasonably withheld) and (if
so required), subject, in each case, to the prior approval
of the Stock Exchange. The Debenture holders undertake
not to transfer the Debentures to any party connected with
the directors, chief executive, substantial shareholders
of the Company or its subsidiaries or any of their
respective associates (as defined in the Listing Rules).
Lock-up period:
The Company will not issue any Shares, debentures or other
securities within a period of 60 days commencing from 40
days after the Completion Date and as long as any of the
Debentures remains outstanding, the Company may not issue
Shares, debentures or other securities the maximum number
of Shares to be issued pursuant to any conversion rights
thereunder in any 30 day period exceeds 35% of the
aggregate trading volume of the Shares over the 30 days
preceding such issue unless the Subscriber is given the
first right of refusal in respect of such issue.
PROCEEDS OF THE ISSUE OF THE DEBENTURES
Reference is made to the Company's announcements dated
20 December 1999 and 3 January 2000.
The net proceeds of the issue of the Debentures is
estimated to be approximately HK$35,800,000 and is
intended to be used (i) as to approximately HK$21,600,000,
for the outstanding repayment of the loan and interest
accruing under the Silver Galaxy Agreement; (ii) if the
proceeds of the Placing are insufficient for the payment
of the subscription price of HK$10,000,000 and
shareholder's loan of HK$30,000,000 under the
Shareholders' Agreement (HK$40,000,000 in aggregate),
the balance after (i) will be used for the outstanding
payment of the said sum of HK$40,000,000 and any remaining
balance as working capital; (iii) if the proceeds of the
Placing are sufficient for the payment of the said sum
of HK$40,000,000, the balance after (i) will be used as
working capital.
PAYMENTS UNDER THE SHAREHOLDERS' AGREEMENT
As mentioned in the Company's announcement dated 20
December 1999, the Company's group has to pay the total
sum of HK$40,000,000 pursuant to the Shareholders'
Agreement on or before 31 January 2000. The Company has
commenced negotiation with Li Yang for an extension of
time to make payments under the Shareholders' Agreement.
The Company will make a further announcement if there is
any development in this regard.
REASON FOR THE ISSUE OF DEBENTURES
The terms and conditions of the Subscription Agreement
were negotiated by the Company and the Subscriber on an
arm's length basis with reference to the current market
conditions as regards interest rates and other terms of
convertible debentures. The directors consider that the
terms of the Subscription Agreement are fair and
reasonable so far as the Company's shareholders are
concerned.
The issue of the Debentures would enable the Company to
meet its obligations under the Silver Galaxy Agreement
and the Shareholders' Agreement. Furthermore, it does not
have immediate dilution effect on the shareholding of the
existing shareholders although it may eventually result
in significant dilution of existing shareholders' interests when the
Debentures are converted into Shares.
EGM:
The EGM would be convened for the purpose of, among other
things, considering and, if thought fit, passing the
ordinary resolution for approving the issue of the
Debentures and the issue and allotment of the Shares upon
exercise of the Conversion Rights.
A circular containing, among other things, details of the
Debentures will be sent to Shareholders of the Company
within 21 days from the date hereof.
Definitions:
"Average" means the average of the lowest five days (not
necessarily consecutive days) closing price per Share
quoted on the Stock Exchange over the 20 consecutive
trading days immediately prior to the date of a conversion
notice served on the Company;
"Company" means Kin Don Holdings Limited;
"Completion Date" means the date of completion of the
subscription of the Debentures by the Subscriber, being
the third business day following the satisfaction (or
waiver) of the conditions for the completion;
"Conversion" means the conversion of 100% of the
Debentures into Shares assuming at the price of HK$0.34
per Share;
"Conversion Price" means the conversion price of the
Debentures as described in the section headed Conversion
Price above;
"Conversion Rights" means rights to convert the
Debentures into Shares;
"Conversion Shares" means Shares into which the
Debentures may be converted pursuant to the Conversion
Rights;
"Debentures" means convertible debentures issued by the
Company to the Subscriber with principal terms disclosed
in this announcement;
"Debenture holders" means holders of the Debentures;
"EGM" means an extraordinary general meeting of the
Company;
"Glowing Bless" means Glowing Bless Corporation;
"Keen Intelligence" means Keen Intelligence Corporation;
"Listing Rules" means the Rules Governing the Listing of
Securities on the Stock Exchange;
"Li Yang" means Li Yang Advertising Public Relations (HK)
Limited;
"Mr Au" means Mr Au Tung Chi, the Chairman of the Company;
"Placing" means the placing of up to 150 million Shares
as mentioned in the Company's announcement dated 15
January 2000, of which 100 million Shares were
underwritten by the placing agents who agreed to use their
best endeavours to place the remaining 50 million Shares;
"Shares" means shares of HK$0.10 each in the capital of
the Company;
"Shareholders' Agreement" means the agreement dated 20
December 1999 entered into between the Company, City
Power Services Limited and Li Yang;
"Silver Galaxy" means Silver Galaxy Investment Limited;
"Silver Galaxy Agreement" means the agreement dated 20
December 1999 entered into between the Company and Silver
Galaxy;
"Stipulated Price" means the lesser of HK$0.20 or 55% of
the average closing price per Share on the Stock Exchange
over the five consecutive trading days immediately before
the Completion Date, in either case, subject to
adjustment;
"Stock Exchange" means The Stock Exchange of Hong Kong
Limited;
"Subscriber" means Stone Church LLC, a private limited
company incorporated in the Cayman Islands;
"Subscription Agreement" means the subscription
agreement dated 21 January 2000 entered into between the
Company and the Subscriber.
By order of the board of directors of
Kin Don Holdings Limited
Wei Cheng Wen
Director
Hong Kong, 22 January 2000
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