The future of cash-strapped Healthway Medical Corp (HMC) will finally be put to a vote tomorrow.
Shareholders will decide whether to allow the clinic chain to issue $60 million of convertible bonds to a private equity firm, Gateway Partners, to help it stay afloat.
The Gateway deal has been mired in controversy since it was announced in January. It sparked an outcry from minority shareholders who objected to HMC transferring a controlling interest to Gateway without obtaining their approval, in breach of Catalist listing rules.
HMC and Gateway eventually revised their deal terms and agreed to hold an extraordinary general meeting (EGM) after the Singapore Exchange made a rare intervention.
Under the new terms, the $60 million convertible bonds carry a redemption premium that would give Gateway an internal rate of return of 6 per cent - much cheaper than the 16.5 per cent tabled initially.
Shareholder approval would also give Gateway rights to nominate a second non-executive director to the HMC board, as well as a chief financial officer. Gateway partner Anand Kumar joined HMC's board on March 24 when it issued a first tranche of $10 million convertible bonds to Gateway.
That deal was a direct rebuff to a rival offer from Indonesia's Lippo Group, which had also offered to lend HMC $10 million, albeit repayable over a shorter period.
Thus far, Gateway has also rejected Lippo's offer to buy out its position in HMC, by selling its $10 million convertible bonds to unnamed "independent parties".
These parties have since converted their bonds into shares worth 10.7 per cent of the enlarged HMC.
Lippo, through a general cash offer, has built up a 23.4 per cent stake in HMC, and is set to be the swing voter at tomorrow's EGM.
Yet despite the failed attempt to bring Gateway to its side, sources say Lippo might just support Gateway's bond deal after all.
For one thing, HMC's dire cash shortage is no joke. It said it needs $23.8 million from the bond proceeds to repay existing loans and salaries. Further delays could destroy more value for shareholders.
It could also be telling that Gateway has stressed it does not intend to make a general offer for HMC. In the event it converts the $60 million bonds into shares at a fixed price of 3.4 cents, Gateway could tender its shares to Lippo at 4.2 cents a share, and still end up in the money.
A quick profit could be reason enough for Gateway to have held out on the offer till now. If Gateway had sold its voting interest to Lippo sooner, the entire $60 million bond deal might have been scuppered.
All eyes are on how Lippo will cast its vote, and what surprises may emerge after that.
