SINGAPORE - A $2 million convertible loan provides immediate financing to address going concern issues despite a condition that imposes an 18 per cent interest if shareholders disapprove of conversion, Indonesian coal miner Resources Prime Group said on Tuesday night (Sept 4) in response to queries by the Singapore Exchange.
Approval of the deal is also likely, given that executive chairman and chief executive Agus Sugiono controls a 40.5 per cent stake in the company and has undertaken to vote in favour of the conversion of the loan to shares, the company said.
Resources Prima on Aug 6 entered into an agreement with substantial shareholder Ang Liang Kim to borrow up to $2 million under a convertible loan. Under the deal, the company agreed to to convert the full amount of the drawn down loan into shares of the company at a conversion price of 0.1 cent per share when trading of the company's shares resumes. If shareholders approve of the conversion, the loan will bear zero interest; if shareholders disapprove of the conversion, the loan will bear 18 per cent interest.
SGX asked the Catalist-listed company to explain how the deal benefits shareholders, given that the company will be running on tight deadlines and there were currently no concrete plans in place for a trading resumption proposal.
Resources Prima said that it faced a shortage of cash and financing to continue its operations after the bankruptcy last year of its main operating subsidiary, PT Rinjani Kartanegara. The deal allows the company to have access to $2 million of immediate financing, which addresses its going concern issue.
Without that financing, the board would be unable to sign off on the financial statements on a going concern basis and may be required to put the group into bankruptcy proceedings, the company said.
"Even if there is an opportunity for a sustainable business to be injected into the company, the company will not be able to timely explore such an opportunity should bankruptcy proceedings commence," the group said in an exchange filing.
With the execution of the investment agreement, the group now has a little more space and time to address the injection of a new sustainable business - in spite of the tight deadlines - which it would not have had, had the company been put into bankruptcy proceedings, it added.
The company has been looking into the injection of a sustainable business and will update the shareholders should there be any major development in this aspect.