OUE issues comfort letter to IHC

Shares in International Healthway Corp had been suspended from Monday (Feb 20) after the medical property developer confirmed that it was in breach of a covenant on its $100 million outstanding bonds, which could entitle bond holders to demand immedi
Shares in International Healthway Corp had been suspended from Monday (Feb 20) after the medical property developer confirmed that it was in breach of a covenant on its $100 million outstanding bonds, which could entitle bond holders to demand immediate payment.PHOTO: ST FILE

Days after it mounted a surprise takeover offer for International Healthway Corp (IHC), property developer OUE has moved to calm the target company's creditors and stakeholders after IHC flagged potential going concern issues.

Shares in IHC had been suspended from Monday after the medical property developer confirmed that it was in breach of a covenant on its $100 million outstanding bonds, which could entitle bond holders to demand immediate payment.

The breach arose after the total shareholding of co-founders Fan Kow Hin, Jong Hee Sen, Aathar Ah Kong Andrew and their immediate family members fell below 30 per cent amid a change of control.

Yesterday, IHC said that OUE had on Friday issued it a "comfort letter" outlining its intention to work towards stabilising IHC's business and financial position.

OUE, which has accumulated a 57.6 per cent stake in IHC over the last month, said it will conduct a review of the business and financial situation of IHC.

OUE also intends to engage with IHC's creditors and stakeholders to understand and possibly restructure the group's financing, it said.

IHC was the third most active counter yesterday, gaining 0.2 cents to close at 10.6 cents a share after trading resumed at 2pm.

Fears that IHC would be sunk by debt woes also appear to have dissipated. The bid price for its $50 million outstanding bonds due April 27 was quoted by Bloomberg at 95 cents on the dollar yesterday, after touching lows of 61.25 cents last November.

As recently as Jan 23, IHC had yet to secure the funds to repay the $50 million coming due in April, but that was before Oxley executives Ching Chiat Kwong and Eric Low led a board ouster and proposed to extend IHC a $55 million loan.

Mr Ching and Mr Low have since divested themselves of control in the company to OUE.

OUE shares gained three cents or 1.55 per cent to close at $1.965 yesterday.

A version of this article appeared in the print edition of The Straits Times on February 22, 2017, with the headline 'OUE issues comfort letter to IHC'. Print Edition | Subscribe