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)
Discloseable Transaction
Variation of terms of payment
* The directors are pleased to announce that a supplemental
agreement dated 31 January 2000 has been reached with Li Yang for an
extension of time to make payments to the JV Company under the
Shareholders' Agreement.
* The last date of payment of the subscription price of
HK$10,000,000 for the Stage Two Subscription was extended to 1 February
2000 and the last date of payment of the interest-free shareholder's loan
of HK$30,000,000 was extended to 2 March 2000.
* If City Power fails to meet such deadline of 2 March 2000, Li Yang
may require the Company to transfer 180 Shares of the JV Company to Li
Yang or its nominee at the price of HK$1.00 subject to retransfer to City
Power as mentioned below.
* The said subscription price of HK$10,000,000 was funded by the
Loan Agreement entered into between the Company and Silver Galaxy.
* A circular will be sent to shareholders shortly containing details
of transactions previously announced and of the Supplemental Agreement.
Reference is made to the announcements of the Company dated 20 December
1999, 3 January 2000, 13 January 2000, 15 January 2000, 22 January 2000
and 27 January 2000. Terms defined in the announcement dated 20 December
1999 bear the same meanings in this announcement, unless the context
otherwise requires.
Background
Under the Shareholders' Agreement, the Company and City Power have to pay
to the JV Company HK$10,000,000 as subscription price for a further 88
Shares in the JV Company and HK$30,000,000 as an interest-free
shareholder's loan (in aggregate HK$40,000,000) to the JV Company on or
before 31 January 2000. As the Placing Agreements and the Subscription
Agreement mentioned in the Company's announcements of 15 January 2000 and
22 January 2000 respectively are subject to approval at an extraordinary
general meeting of the Company, the Company will need an extension of time
for making payment of the said sum of HK$40,000,000 to the JV Company. The
Company has been negotiating with Li Yang regarding such extension and the
two parties reached a supplemental agreement dated 31 January 2000 in this
regard.
Supplemental Agreement
The principal terms of the supplemental agreement include:
(1) The payment by City Power of the said subscription price of
HK$10,000,000 to the JV Company on or before 1 February 2000.
(2) Subject to fulfilment of (1) above, the payment of the said
shareholder's loan of HK$30,000,000 to the JV Company on or before 2 March
2000, failing which Li Yang, in addition to any other remedies it may
have, shall have the option ("Option") to require City Power to transfer
180 Shares of the JV Company to Li Yang or its nominee at the price of
HK$1.00.
(3) In the event of the exercise of the Option and if subsequently
after the transfer of the 180 Shares, with the written consent of Li Yang,
the JV Company has agreed to accept and receive from City Power, the sum
of HK$30,000,000 being the interest-free shareholder's loan referred to
above plus an undertaking by City Power to pay the JV Company any damages
for the failure to advance such sum to the JV Company, Li Yang shall
immediately upon the JV Company's acceptance of such sum of HK$30,000,000
transfer such number of Shares as equivalent to 18% of the issued share
capital of the JV Company to City Power at the price of HK$1.00, and in
which event amendments or variations shall immediately be made to the
Shareholders' Agreement to reverse those amendments made as a result of
such transfer of the 180 Shares.
Shareholders of JV Company
Particulars of the shareholdings of the JV Company on 20 December 1999
(before capital injection), on 30 December 1999 (immediately after the
Stage One Subscription), at the date hereof and immediately after the
exercise of the Option by Li Yang if City Power defaults in the
Supplemental Agreement are as follows:
Upon default,
immediately after the
exercise of the
20 December 1999 30 December 1999 At the date hereof Option by Li Yang
City Power
40 Shares (40%) 392 Shares (42.98%) 480 Shares (48%) 300 Shares (30%)
Li Yang
60 Shares (60%) 520 Shares (57.02%) 520 Shares (52%) 700 Shares (70%)
Reason for the Option
City Power has 48% equity interest in the JV Company after the Stage Two
Subscription. The percentage of 48% was determined in the Shareholders'
Agreement on the basis that the total subscription price of HK$50,000,000
(HK$40,000,000 for the Stage One Subscription and HK$10,000,000 for the
Stage Two Subscription) together with the interest-free shareholder's loan
of HK$30,000,000 would represent 48% of the total investment of the JV
Company. Despite City Power's shareholder's loan of HK$30,000,000 to the
JV Company was named as a loan, it is interest-free and cannot be repaid
to City Power without the consent of Li Yang, and therefore such loan is
regarded by City Power and Li Yang as equity investment in nature. The
total investment of equity nature by City Power in the JV Company is thus
HK$80,000,000, being the aggregate of the HK$50,000,000 subscription price
and the HK$30,000,000 shareholder's loan. In the event that City Power's
investment reduces from HK$80,000,000 to HK$50,000,000, the percentage of
equity interest of City Power in the JV Company should be proportionally
reduced from 48% to 30%, hence the transfer of 180 Shares to Li Yang as
aforesaid upon exercise of the Option. The directors, including
independent non-executive directors, consider such terms of the
Supplemental Agreement to be fair and reasonable. Such reduction will have
no effect on the consolidated net asset value of the group.
Loan Agreement with Silver Galaxy
Pursuant to the terms of the Supplemental Agreement, the Company and City
Power have to pay HK$10,000,000 for the Stage Two Subscription to the JV
Company on or before 1 February 2000. For funding such subscription price,
the Company has entered into a loan agreement ("Loan Agreement") dated 31
January 2000 with Silver Galaxy under which Silver Galaxy has advanced a
loan in the sum of HK$10,000,000 to the Company on 1 February 2000. Such
loan is repayable on or before 2 March 2000 and the rate of interest
thereon is 3 months HIBOR plus 5% per annum. If the loan is not repaid on
or before 2 March 2000, Silver Galaxy shall have the right to require the
Company to transfer to Silver Galaxy a percentage of the shares in City
Power up to approximately 20.18%, in satisfaction of such part of the
outstanding loan and interest calculated in the following formula:
An amount not exceeding the outstanding amount of the Loan with accrued
Interest thereon x Total number of ordinary shares in City Power
-----------------------------------------------------------------------
HK$50,000,000* representing the aggregate capital investment cost paid by
City Power to the JV Company
* The aggregate capital investment by City Power in the JV Company
is currently HK$50,000,000. If the loan is not repaid by 2 March 2000 due
to the Company's failure to raise funds from the proposed placings and
issue of convertible debentures as aforesaid, City Power will not have the
funds to provide the shareholder's loan of HK$30,000,000 to the JV Company
so that the aggregate capital investment will remain at HK$50,000,000.
Given the imminent need of the capital within a short period of time and
that there were no other more favourable options available to the Company,
including a bank loan, the directors, including independent non-executive
directors, consider that the terms of the Loan Agreement, which are
negotiated on arm's length, are fair and reasonable and are on normal
commercial terms. The loan serves as a bridging loan pending receipt of
proceeds from the proposed placings and issue of the convertible
debentures as mentioned in the Company's announcements dated 15 January
2000 and 22 January 2000 respectively. The Company will repay the loan
from such proceeds upon receipt of the same.
Shareholdings of City Power
Particulars of the percentage of the shareholdings of City Power at the
date hereof and immediately after the transfer of shares in City Power
from the Company to Silver Galaxy if the Company defaults in the Loan
Agreement are as follows:
At the date hereof Upon default under the Loan Agreement
Kin Don 100% 79.82%
Silver Galaxy * 20.18%
Use of proceeds of the placings and issue of convertible debentures
As the Stage Two Subscription has been funded by the bridging loan under
the Loan Agreement, the net proceeds of the said placings will first be
used to repay such loan, and the balance will be used for advancing the
said shareholder's loan of HK$30,000,000 to the JV Company on or before 2
March 2000. In case such balance of the net proceeds from the placings are
insufficient for paying the entire shareholder's loan of HK$30,000,000 to
the JV Company, the difference ("Difference") will be funded by the net
proceeds from the issue of convertible debentures aforesaid.
The net proceeds of the issue of the convertible debentures, estimated to
be approximately HK$35,800,000, are intended to be used (i) as to
approximately HK$21,600,000, for the repayment of the outstanding loan and
interest accruing under the Silver Galaxy Agreement; (ii) if necessary,
for making up the Difference; and (iii) any remaining balance after (i) or
(ii), as the case may be, will be used as working capital.
Despatch of circular
The Company will despatch the circular to its shareholders as mentioned in
its announcement dated 27 January 2000 shortly. The circular will also
contain details of the Supplemental Agreement.
By Order of the Board
Kin Don Holdings Limited
Wei Cheng Wen
Director
Hong Kong, 2 February 2000
|
