Beleaguered clinic chain operator Healthway Medical Corp (HMC) remains at the centre of a takeover tussle after one party changed the terms of a lifeline.
HMC sought a trading halt before the market opened yesterday. After the close, it announced details of a proposed interim financing plan from Lippo China Resources, a unit of Lippo Group, to address its problems paying staff.
For instance, the medical group yesterday confirmed a $10 million loan, repayable after 12 months.
The Straits Times reported on Sunday that HMC was caught between moves to take over the firm by Indonesia's Lippo Group - which has a 21.9 per cent stake in the firm - and Cayman-based private equity fund Gateway Partners.
This comes as Gateway changed its convertible notes deal with HMC for quicker funds.
Gateway had an earlier agreement with HMC to raise $70 million from the private equity fund, via convertible bonds. The bonds could be exchanged for up to 90.17 per cent of HMC's existing share capital, or else an interest of up to 16 per cent a year would be put in place.
Gateway will now remove the coupon for a $10 million convertible note and also a $60 million one.
Changes also mean the $10 million convertible note will now mature in five years, not two, and will be unsecured owing to an early release. The new terms are said to be better and can be carried out fast.
HMC said yesterday it is aware of its contractual obligations regarding the $70 million lifeline. The medical group also has an alternate proposal from GW Active - part of Gateway - to meet immediate liquidity requirements, it noted. This is under review and subject to regulatory approvals and requirements.
HMC has been plagued by staff payments and debt issues in recent months, with doctors failing to turn up to work at several clinics.
It had a cash balance of $527,000 at the end of last year, and requires $10.7 million for overdue salaries and debt by March 31.
President Veronica Chan had asked employees for more time regarding salaries at the end of last month, citing rising costs and rental rates among other things.
Questionable loans have led to its cash shortage, when in fact, the group's revenues have grown and operating cashflows from its clinics were positive in the past three years.
Make Health Connect, the third-party administrator for 39 Healthway clinics, has made advance payments of $600,000 to Healthway to cover doctors at the clinics for two months.
HMC advised shareholders and investors to exercise caution when dealing in the shares.