The board of medical property developer International Healthway Corp (IHC) is once more convening a meeting to seek approval to issue new shares and possibly water down the stakes of existing investors.
Tomorrow's meeting is being held after IHC's annual general share issue mandate was overwhelmingly rejected by shareholders at its annual general meeting in July.
Shareholders representing 72 per cent of votes then refused to allow IHC to issue new stock not exceeding 100 per cent of the existing shares, or 50 per cent of the issued shares on a non-pro rata basis, as in the case of a private placement, for example.
This time, the board has lowered its limits. It is seeking a mandate to issue new shares of up to 50 per cent of the existing shares, or up to 25 per cent of the issued shares on a non-pro rata basis.
Notably, tomorrow's meeting is being convened after two substantial shareholders demanded on Sept 2 that the firm remove four directors, citing the "worrying performance and developments of the company". If the substantial shareholders' stakes are verified, IHC must hold another extraordinary meeting before Nov 2 to decide whether the board stays intact.
Shareholder discontent with the last share issue mandate came after IHC shares took a tumble last year and never recovered. In September then, the Singapore Exchange advised caution on IHC shares after uncovering that a few individuals trading among themselves through various accounts were behind over 60 per cent of IHC's total traded volume since April.
When trading resumed days later, after a voluntary suspension, IHC shares quickly fell 68.6 per cent or 21.6 cents from 31.5 cents to 9.87 cents. The counter closed unchanged at 7.2 cents yesterday.
IHC's pattern of poor reporting has also worried shareholders and note holders alike. In August, IHC delayed interest payments to holders of its $50 million 6 per cent notes by two days, citing "the inadvertent delay in the processing and remittance of the funds to the respective note holders", even though the bond coupon has been a standing payment since last year.
In May, IHC sought permission from the SGX to extend the deadline for its second-quarter results release to Aug 28 from Aug 14, after already appealing in April for more time to prepare its financial reports for the first quarter and hold its annual general meeting.
One of the reasons for the hold-up was that the board and auditors PwC disagreed on the methods used to value two Chinese properties.
The IHC board is seeking to appoint Baker Tilly TFW as auditors at tomorrow's meeting, since PwC chose not to seek re-appointment.
Last month, IHC confirmed that its three Melbourne properties were put under receivership after a debt dispute with Crest Capital Asia snowballed. It assured investors that those properties had a combined fair value above the outstanding amount owed to lenders Westpac, National Australia Bank and Qualitas. Until the properties are sold, however, that assurance is not a certainty.
IHC executive director Angeleca Lim Beng Choo also clarified via e-mail yesterday that the receivership on the Australian properties does not have an impact on IHC's other loan covenants.