TIDMASPL
RNS Number : 7436W
Aseana Properties Limited
13 December 2019
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) 596/2014.
13 December 2019
Aseana Properties Limited
("Aseana" or the "Company")
Recommended Proposals regarding the future of the Company
Posting of Circular and Notice of General Meeting
Aseana Properties Limited (LSE: ASPL), a property developer in
Malaysia and Vietnam, listed on the Main Market of the London Stock
Exchange, announces that it has today posted to the Company's
shareholders ("Shareholders") a circular (the "Circular") putting
forward recommended Proposals regarding the future of the Company
to be considered at a General Meeting.
The General Meeting will be held at 12 Castle Street, St.
Helier, Jersey, JE2 3RT, Channel Islands on Monday, 30 December
2019 at 10.00 a.m. GMT.
The Circular will shortly be made available on the Company's
website: http://www.aseanaproperties.com/ and submitted to the
National Storage Mechanism to be made available for public
inspection at http://www.morningstar.co.uk/uk/nsm. Capitalised
terms used but not defined in this announcement have the meanings
set out in the Circular. Further details of the recommended
Proposals, extracted from the Circular, are set out below.
For further information:
Aseana Properties Limited Tel: 020 7920 3150
(via Tavistock)
Liberum Capital Tel: 020 3100 2000
Gillian Martin / Owen Matthews
Tavistock Tel: 020 7920 3150
Jeremy Carey / James Verstringhe
Set out below is a reproduction, without material adjustment, of
the key sections of the Chairman's letter to Shareholders which are
contained within the Circular:
RECOMMED PROPOSALS REGARDING THE FUTURE OF THE COMPANY
1 Introduction and background to the Proposals
When the Company was launched in 2007 the Board considered it
desirable that Shareholders should have an opportunity to review
the future of the Company at appropriate intervals. Accordingly, at
shareholder meetings held in 2015 and 2018, in accordance with the
Articles, the Board put forward a resolution to Shareholders to
determine if the Company should continue in existence.
At the 2015 AGM Shareholders voted for the Company to continue
in existence and, at the same time, approved the adoption of a
divestment investment policy to enable the controlled, orderly and
timely realisation of the Company's assets, with the objective of
achieving a balance between periodically returning cash to
Shareholders and maximising the realisation value of the Company's
investments (the "Divestment Investment Policy").
At a general meeting held on 23 April 2018, inter alia,
Shareholders again voted for the Company to continue in existence
and approved certain amendments to the Articles requiring a further
resolution for Shareholders to determine whether the Company should
continue to be proposed at a general meeting of the Company to be
held in December 2019 (the "2019 Discontinuation Resolution").
The notice of general meeting appended to this circular convenes
that general meeting and this letter seeks to provide you with some
further updates and information in relation to the Company to help
inform your decision on how to vote on the Resolutions to be
proposed at the General Meeting.
2 Company update
Restructuring of the management of the Company and changes to
the Board
As you will be aware, the Management Agreement between Ireka
Development Management Sdn Bhd ("IDM") and the Company was
terminated with effect from 30 June 2019. IDM is a wholly owned
subsidiary of Ireka Corporation Berhad ("Ireka") which holds 23.07
per cent. of the Company's total voting share capital and Legacy
Essence Limited, an affiliate of Ireka, together with its related
parties ("Legacy Essence") owns in aggregate 18.43 per cent. of the
Company's total voting share capital, which together total 41.50
per cent. of the Company's total voting share capital. IDM decided
not to continue acting as the development manager so as to avoid
any perception of conflict between IDM's role as development
manager and Ireka's position as a shareholder of the Company; IDM
had become aware through discussions with a significant shareholder
of the Company that some shareholders may have perceived there to
have been a misalignment between Ireka's interests in the
divestment of the Company's portfolio and that of other
Shareholders.
After careful consideration, in particular noting that the
Company is in divestment mode, the Board decided that the most
practical and expeditious next step in the best interests of
Shareholders and the Company as a whole was to internalise the
management of the Company.
As part of this process, the Board identified and appointed Mr
Chan Say Yeong as the Chief Executive Officer of the Company with
effect from 3 June 2019. It also sought to strengthen the
capability and capacity of the Board to achieve the Divestment
Investment Policy and enhance governance oversight through the
re-appointments of Mr Christopher Lovell and Mr Nicholas Paris to
the Board and the appointments of Ms Monica Lai, who is the Group
Deputy Managing Director of Ireka, and Ms Helen Siu Ming Wong, who
was named as the Divestment Director with a specific focus on
selling the Company's remaining assets.
With regards the day-to-day administration of the Company's
assets, a number of IDM employees have been seconded to assist with
the operation of the assets and this arrangement has enabled the
Company to avoid the need to hire alternative, additional employees
to fulfil these roles at short notice. This arrangement also gives
the Company the flexibility to reduce the number of employees as
assets are sold. The Company pays IDM a monthly fee, calculated at
cost, in respect of this secondment arrangement.
Divestment Investment Policy
The Company has realised gross proceeds of US$250 million since
June 2015 but there are still six assets yet to be sold. The
disposal of the remaining assets in the portfolio has been slower
than anticipated, reflecting increasingly competitive market
conditions in the locations and market sectors in which the Company
has assets.
To date, net sale proceeds from disposals have largely been used
to pay down project debts across the portfolio, to fund the
Company's working capital requirements and to finance the
construction of The RuMa Hotel and Residences, which is the
Company's final asset to have been developed. As a result of the
previous asset disposals, approximately US$10 million was also
returned to Shareholders via a share buyback conducted in January
2017.
The Board is aware that Shareholders are eager for a more
expeditious disposal programme and it is this which prompted the
restructuring of the Board and the Company's management
arrangements in recent months. With these new arrangements in
place, a new sales strategy has been adopted and the Board has
prioritised the divestment of the Company's assets as soon as
possible to ensure further capital can be returned to
Shareholders.
Since internalising the management and disposal process for the
remaining assets, the Board has revised all of the sale due
diligence processes and marketing documentation for each of the
Company's remaining assets, the result being that there is now
extensive information available in virtual data rooms for qualified
buyers interested in the assets in the portfolio. The Board has
also identified those assets which it deems to be of highest
priority to sell, on the basis of those properties being more
readily saleable and that the proceeds of those sales should be
capable of paying down the Company's most significant debt
facilities. The early settlement of those debt facilities would
then enable the Company to use the disposal proceeds of further
asset sales thereafter to return cash to Shareholders.
The new sales strategy for the Company's assets commenced
externally in mid-September and to date approximately 150
prospective investors have been approached and approximately 55
non-disclosure agreements have been signed with interested buyers
in respect of two of the Company's principal assets and active sale
discussions continue on them.
The Board is working to complete the next asset sales from Q1
2020 onwards and will be pragmatic in its approach. However, there
can be no guarantee that these sales will successfully conclude
within this timeframe. As a result, the Board is not currently able
to provide Shareholders with any indication as to when further
capital distributions can be expected from the Company, but
re-iterates that this is the Board's key objective.
The Board is keen to ensure that RNAV valuations of the
Company's assets are reflective of the current market environment
and a review of the value of all of the assets within the portfolio
is ongoing. The portfolio revaluation will be conducted using a
number of external valuers (each a specialist in the relevant
market of the relevant asset) and the Board may bring in certain
new valuation firms as part of that process. The review is expected
to be completed during the audit of the 2019 Accounts, which
themselves are expected to be completed when the accounts are
published in late April 2020.
Debt facilities
The Group currently has, in aggregate, approximately US$88
million of outstanding bank loans from seven different banks. Each
loan provides the relevant bank with security over certain of the
Group's assets and the Company has granted corporate guarantees in
respect of certain loans of its subsidiaries.
The Board is currently seeking to re-negotiate certain of the
Group's loan facilities in order to amend their scheduled repayment
dates to make them coincide with the expected sale dates of the
assets that they have financed. This process is ongoing.
3 2019 Discontinuation Resolution
Notwithstanding the obligation on the Board to propose the 2019
Discontinuation Resolution pursuant to the Existing Articles, the
Board firmly believes that placing the Company into liquidation
(which could be the result of passing the 2019 Discontinuation
Resolution) would have a significant adverse impact on Shareholder
value for the reasons set out below.
Possible breach of banking covenants
The Company believes that, in the event that the 2019
Discontinuation Resolution is passed, an event of default under the
lending covenants of certain of the Company's facility arrangements
could be triggered. If an event of default is triggered the
relevant loans would become immediately repayable and this could
result in security given to secure those loans being enforced. This
could lead to the banks foreclosing on the Group's loan facilities
and the Group's remaining assets being disposed of on behalf of the
banks rather than Shareholders at significantly lower prices than
anticipated. Further, this could force the Company to enter into
liquidation due to having insufficient liquid assets to repay the
facilities if proceeds from the security that has been enforced are
insufficient. The Group does not currently have sufficient
available cash to be able to repay the entirety of its loans in the
event they are accelerated.
The Company no longer being a "going concern"
If the 2019 Discontinuation Resolution is passed the Directors
may not be able conclude that the Company is a "going concern" and
accordingly be unable to prepare the 2019 Accounts other than on a
"break up" basis. This could lead certain of the Company's lenders
to consider that an event of default has occurred under the terms
of the Company's existing facilities and the banks could seek
immediate repayment of those loans.
It is also for this reason that the Board has determined that
the next discontinuation vote should take place in May 2021 in
order for the Board to conclude, at the date of the 2019 Accounts
to be published in April 2020, that the Company is a going concern.
For this purpose, the next discontinuation vote should be scheduled
for a date beyond 12 months from the date of the audit report.
Whilst the auditors are still expected to refer to the
discontinuation vote in the audit report, notwithstanding this, the
Board do expect the 2019 Accounts to be prepared on a going concern
basis. An earlier scheduled discontinuation vote would prevent this
going concern determination and could lead to an event of default
under the Company's banking arrangements.
Impact on asset sale values
The Company may not be able to achieve full value for the
Company's remaining assets if the 2019 Discontinuation Resolution
is passed as prospective buyers may seek a reduction to the prices
at which they are willing to acquire the assets in the knowledge
that (a) the Board would be under pressure to take steps to wind up
the Company as soon as practicable; and/or (b) if the passing of
the 2019 Discontinuation Resolution results in an event of default
under, and acceleration of, a loan secured by the Group's assets,
such security may be enforced and the assets may be realised at a
value lower than that which could be expected to be obtained if the
assets were sold/offered to the market in the Group's ordinary
course of business.
4 Proposals
In light of the severity of the possible consequences for
Shareholder value, the Directors are unanimously recommending that
you vote AGAINST the 2019 Discontinuation Resolution.
Instead, the Board recommends that Shareholders allow the
Company to continue in order to give the new divestment strategy
time to deliver results and to enable the Board and the Company's
auditors to conclude that the Company is a going concern for at
least 12 months from the date on which the 2019 Accounts are due to
be finalised, and thereby avoid the consequences described in
paragraph 3 above. The Board therefore proposes that the next
discontinuation vote take place at a general meeting to be held in
May 2021.
The Board is clear that enabling the Company to continue to
pursue the new divestment strategy, rather than placing the Company
into liquidation or seeking a "fire sale" of the Company's
portfolio at potentially significantly depressed prices, is in the
best interests of the Company and Shareholders as a whole.
In order to implement this proposal, the Existing Articles will
need to be amended. A blacklined version of the proposed amendment
to the Existing Articles is set out in the Appendix to this
circular. The Existing Articles and the Amended Articles (together
with a comparison document showing the changes between the two) are
available for inspection on the Company's website at
www.aseanaproperties.com and during normal business hours on any
weekday (public holidays excepted) at the registered office of the
Company at 12 Castle Street, St. Helier, Jersey JE2 3RT, and will
also be available for inspection at the General Meeting and for at
least 15 minutes prior to the General Meeting.
The Directors are unanimously recommending that you vote FOR the
resolution to amend the Existing Articles which will allow the
Company to continue until May 2021, which will be proposed as a
special resolution.
5 Additional considerations for Shareholders
In connection with the Proposals, Shareholders should be aware
of the following additional considerations:
-- there can be no guarantee that the result of implementing the
Proposals will provide the returns or realise the capital sought by
Shareholders. The Company's investments are illiquid. Accordingly,
they may be disposed of at a discount to their current valuations.
The eventual disposal price of the Company's remaining assets is
unknown and it is possible that the Company may not be able to
realise some investments at any value; and
-- returns of cash will be made at the Directors' sole
discretion, as and when they deem that the Company has sufficient
assets available to return cash to Shareholders, subject to
applicable Jersey law. Shareholders will therefore have little
certainty as to when their capital will be returned. Distributions
pursuant to the orderly realisation programme are subject, amongst
other things, to the Board being able to give the necessary
declaration(s) of solvency required by Jersey law. Distributions
under the orderly realisation programme are subject to the Board
continuing to be satisfied, on reasonable grounds, that the Company
will, at the time of distribution and for a period of 12 months
thereafter, in respect of each distribution, continue to satisfy
the statutory solvency test. Returns of cash may also in certain
circumstances be subject, amongst other things, to the Company
obtaining the consent of one or more lenders to the Group.
6 General Meeting
The implementation of the Proposals is conditional on the
outcome of the votes cast by Shareholders in connection with the
Resolutions to be proposed at the General Meeting. A notice
convening the General Meeting, which is to be held at 10.00 a.m. on
30 December 2019, is set out at the end of this document.
At the General Meeting, Resolution 1 (the 2019 Discontinuation
Resolution) will be proposed as an ordinary resolution and will
require a vote in favour by Shareholders holding a majority of the
Shares represented at the General Meeting, either in person or by
proxy, and voting on Resolution 1, to be validly passed. The
Directors are unanimously recommending that you vote AGAINST
Resolution 1.
Resolution 2 (the proposed amendment to the Existing Articles to
allow the Company to continue until May 2021) will be proposed,
conditional on the failure of Resolution 1 (the 2019
Discontinuation Resolution), as a special resolution and will
require a vote in favour by Shareholders holding not less than two
thirds of votes cast in order to be validly passed. The Directors
are unanimously recommending that you vote FOR Resolution 2.
Action to be taken by Shareholders
Whether or not you intend to be present at the General Meeting,
Shareholders are requested to complete and return the accompanying
Form of Proxy in accordance with the instructions printed thereon,
so as to be received as soon as possible, and in any event no later
than 10.00 a.m. on 27 December 2019. The completion and return of
the Form of Proxy will not preclude you from attending the General
Meeting and voting in person should you so wish.
7 Irrevocable voting undertakings from certain Shareholders
Ireka has been unable to vote its Shares on previous
discontinuation resolutions proposed at general meetings of the
Company because of commitments it had made to the Company not to
undertake any activities which would result in the Company ceasing
to be able to carry on its business independently of Ireka.
Now that Ireka has resigned its position as manager, those
commitments have ended and the Directors have concluded that votes
cast by Ireka in respect of its Shares on the Resolutions to be
proposed at the General Meeting will be accepted. Each of Ireka and
Legacy Essence, which in aggregate hold 41.50 per cent. of the
total voting rights of the Company as at the date of this circular,
has given its irrevocable undertaking to vote the Shares held in
its name at the time of the General Meeting against Resolution 1
and in favour of Resolution 2.
8 Directors' voting intentions and recommendation
The Directors consider that the Proposals are in the best
interests of the Company and Shareholders as a whole.
Accordingly, the Directors unanimously recommend that you vote
(1) AGAINST Resolution 1 (the 2019 Discontinuation Resolution) to
be proposed at the General Meeting and (2) FOR Resolution 2 (to
amend the Existing Articles).
Each of Gerald Ong Chong Keng and Christopher Lovell, the two
Directors who are also beneficial holders of Shares amounting to
1.08 per cent. of the total voting rights of the Company in
aggregate, has given an irrevocable undertaking to vote the Shares
held in his name at the time of the General Meeting
accordingly.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
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of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
NOGUUUBRKOAUAAA
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