ITC CORPORATION<0372> - Announcement
The Stock Exchange of Hong Kong Limited takes no responsibility for the
contents of this announcement, makes no representations as to its accuracy
or completeness and expressly disclaims any liability whatsoever for any
loss howsoever arising from or in reliance upon the whole or any part of
the contents of this announcement.
ITC CORPORATION LIMITED
(Incorporated in Bermuda with limited liability)
ANNOUNCEMENT
SUBSCRIPTION AND PLACING OF CONVERTIBLE NOTES
(Connected transaction)
On 21st January, 2000, ITC Corporation Limited entered into a
convertible notes subscription agreement for the subscription
of the Convertible Notes amounting to HK$200,000,000 by
Galaxyway, the single largest shareholder of the Company, and
a placing and underwriting agreement for the placement of the
Convertible Notes amounting to HK$200,000,000, with an
over-allotment option of an amount up to HK$60,000,000, to
independent investors.
The aggregate net proceeds of the Convertible Notes Issue are
estimated to be approximately HK$393 million (assuming the
over-allotment option is not exercised), or, in case of the
exercise of the over-allotment option in full, approximately
HK$452 million, which will be used as to about 350 million
for reduction of short term borrowings and the balance for
general corporate purpose of the Group. The Company currently
has no specific plan for the use of such balance.
Completion of the Convertible Notes Issue is subject to the
fulfilment of certain conditions which include, inter alia,
the approval of shareholders of the Company (other than
Galaxyway and its associates (as defined in the Listing
Rules)) at a special general meeting of the Company and the
approval by the Listing Committee of the Stock Exchange of
the listing of, and permission to deal in, the new Shares
falling to be issued upon conversion of the Convertible
Notes.
THE CONVERTIBLE NOTES SUBSCRIPTION AGREEMENT AND THE
CONVERTIBLE NOTES PLACING AGREEMENT
1. Date
21st January, 2000
2. Parties
Under the convertible notes subscription agreement (the
"Convertible Notes Subscription Agreement")
Issuer : ITC Corporation Limited (the "Company")
Subscriber : Galaxyway Investments Limited ("Galaxyway"),
the single largest shareholder of the Company, is indirectly
wholly-owned by Dr. Chan Kwok Keung, Charles, a director of
the Company. Galaxyway is an investment holding company for
the purpose of holding the interests in the Company
Under the convertible notes placing agreement (the "Convertible Notes
Placing Agreement")
Issuer : The Company
Placing agent : Tai Fook Securities Company Limited ("Tai Fook")
and underwriter
3. Aggregate amount of convertible notes (the
"Convertible Notes") to be issued by the Company
HK$400,000,000, which will be settled in cash upon
completion, and of which HK$200,000,000 will be subscribed by
Galaxyway and HK$200,000,000 will be fully underwritten by
Tai Fook and placed to independent investors (the
"Convertible Notes Placees"), with an option of an additional
amount of HK$60,000,000 exercisable by Tai Fook within one
month from the date of completion of the Convertible Notes
Placing Agreement (the subscription and the placing together,
the "Convertible Notes Issue"). Tai Fook is entitled to an
underwriting commission of 2.5 per cent. of the aggregate
principal amount of the Convertible Notes placed through Tai Fook.
4. Principal terms of the Convertible NotesIssuer : The Company
Principal amount : HK$400,000,000 in aggregate, with an
over-allotment option of an amount up to HK$60,000,000
Conversion price : HK$1.75 per ordinary share of HK$0.10
each in the Company ("Share") (subject to adjustments), representing a
premium of about 16.05 per cent. to the 5-day average closing price of the
Shares as quoted on The Stock Exchange of Hong Kong Limited (the "Stock
Exchange") of HK$1.508 for the period from 17th January, 2000 to 21st
January, 2000 and a premium of about 19.05 per cent. to the closing price
of HK$1.47 per Share on 21st January, 2000. The conversion price of the
Convertible Notes was negotiated between the Company and Tai Fook on an
arm's length basis
Interest : Prime rate per annum as quoted by The
Hongkong and Shanghai Banking Corporation Limited, payable
semi-annually in arrears
Conversion period : The Convertible Notes may be converted
in whole or in part (in an amount or integral multiple of
HK$100,000) at any time 3 months after the date of issue of
the Convertible Notes until maturity
Maturity : The Company shall repay the outstanding
principal amount of each of the Convertible Notes, together
with interest accrued from the last interest payment date up
to and including the date of repayment, on the third
anniversary of the date of issue of the Convertible Notes
Transfer : The Convertible Notes may not be assigned or
transferred without the prior written consent of the Company
except to the subsidiaries or the holding company of the
holders of the Convertible Notes and may not be assigned or
transferred to connected persons (as defined in the Rules
Governing the Listing of Securities on the Stock Exchange
(the "Listing Rules")) of the Company without the prior
written consent of the Company and the Stock Exchange
Listing : No application will be made for the listing
of the Convertible Notes on the Stock Exchange or any other
stock exchange. An application will be made for the listing
of Shares to be issued on exercise of the conversion rights
attaching to the Convertible Notes
Upon full conversion of the Convertible Notes, a total of
228,571,428 Shares will be issued (assuming the
over-allotment option is not exercised), which represent
approximately 43.46 per cent. of the existing issued ordinary
share capital of the Company, approximately 30.29 per cent.
of the issued ordinary share capital of the Company as
enlarged by such conversion, assuming no other issue of
Shares is made before full conversion of the Convertible
Notes. Galaxyway is currently interested in about 32.63 per
cent. of the existing issued ordinary share capital of the
Company. Upon full conversion of the Convertible Notes
(assuming the over-allotment option is not exercised),
Galaxyway will be interested in approximately 37.89 per cent.
of the issued ordinary share capital of the Company as
enlarged by such conversion, assuming no other issue of
Shares is made before full conversion of the Convertible
Notes.
Assuming the over-allotment option is exercised in full, a
total of 262,857,142 Shares will be issued upon full
conversion of the Convertible Notes, which represent
approximately 49.98 per cent. of the existing issued ordinary
share capital of the Company, approximately 33.32 per cent.
of the issued ordinary share capital of the Company as
enlarged by such conversion, assuming no other issue of
Shares is made before full conversion of the Convertible
Notes. Galaxyway will be interested in approximately 36.25
per cent. of the issued ordinary share capital of the Company
as enlarged by such conversion, assuming no other issue of
Shares is made before full conversion of the Convertible Notes.
Galaxyway has no present intention to dispose of the Convertible Notes.
5. Placees
The Convertible Notes Placees are independent professional
investors and will be more than six.
6. Independence of the Convertible Notes Placees and the underwriter
The Convertible Notes Placees and Tai Fook are third parties independent
of, and not connected with, any of the directors, chief executive or
substantial shareholders of the Company and any of its subsidiaries or any
of their respective associates (as defined in the Listing Rules), except
that a sum of HK$60 million from the net proceeds of the Convertible Notes
Issue will be used to repay the outstanding amount under a facility
granted by Tai Fook Finance Company Limited ("Tai Fook Finance"), a fellow
subsidiary of Tai Fook, to the Company.
7. Conditions and completion of the Convertible Notes Issue
Completion of the Convertible Notes Placing Agreement is conditional upon
completion of the Convertible Notes Subscription Agreement. Completion of
the Convertible Notes Issue will take place on the second business day
after the fulfilment of the following conditions or such other date as may
be agreed between the Company, Galaxyway and Tai Fook, but in any event
shall take place not later than 10th March, 2000:
(a) approval of the Convertible Notes Issue by the
shareholders of the Company (other than Galaxyway and its
associates) at a special general meeting of the Company;
(b) the Listing Committee of the Stock Exchange granting
listing of, and permission to deal in, the new Shares falling
to be issued upon conversion of the Convertible Notes; and
(c) the Bermuda Monetary Authority granting approval to
the issue of the Convertible Notes and the Shares falling to
be issued pursuant to the exercise of the conversion rights
attaching to the Convertible Notes.
Completion of the Convertible Notes Issue is expected to take place on or
around 3rd March, 2000.
The new Shares to be issued upon conversion of the Convertible Notes will
be issued free from all liens, charges and encumbrances and will rank
equally in all respects with the existing Shares in issue.
8. Force majeure
Tai Fook and Galaxyway are entitled, on the occurrence of certain events
(including a change in national or international law or regulation,
financial, political or economic conditions as would likely prejudice
materially the business and financial position of the Company and its
subsidiaries (the "Group"), material breach of any of the undertakings,
representations and warranties set out in the Convertible Notes
Subscription Agreement and the Convertible Notes Placing Agreement, and
material adverse change in the financial position of the Company), to
terminate the Convertible Notes Subscription Agreement and the Convertible
Notes Placing Agreement (as appropriate) by giving notice to the Company
prior to 10:30 a.m. on the date of completion of the Convertible Notes
Issue.
9. Use of proceeds
The net proceeds of the Convertible Notes Issue are estimated to be
approximately HK$393 million (assuming the over-allotment option is not
exercised), or, in case of the exercise of the over-allotment option in
full, approximately HK$452 million. It is intended that such net proceeds
will be used as to approximately HK$350 million for reduction of short
term borrowings which have been due or will fall due shortly (including
the repayment of a sum of HK$60 million to Tai Fook Finance for the
outstanding amount under a facility granted by Tai Fook Finance to the
Company) and the balance will be used for general corporate purpose of the
Group. The Company currently has no specific plan for the use of such
balance.
CHANGES TO THE SHAREHOLDING IN THE COMPANY AS A RESULT OF THE
CONVERTIBLE NOTES ISSUE
The Company has in issue the following two other convertible notes:
(a) convertible notes (the "1997 Convertible Notes")
issued by the Company in February 1997 with an aggregate
principal amount of HK$150,000,000 which entitle the holders
thereof to convert into Shares from the date of their issue
up to the fifth anniversary of the date of their issue at an
adjusted conversion price of HK$15.94 per Share (subject to
further adjustments). Galaxyway is not interested in any of
the 1997 Convertible Notes; and
(b) convertible notes (the "1999 Convertible Notes")
issued by the Company in October 1999 with an aggregate
principal amount of HK$120,000,000 which entitle the holders
thereof to convert into Shares from the date of their issue
up to the third anniversary of the date of their issue at a
conversion price of HK$1.10 per Share (subject to
adjustments). Galaxyway is interested in the 1999 Convertible
Notes with a principal amount of HK$50,000,000 and has not
converted any part of the 1999 Convertible Notes since their
issue. The net proceeds from the issue of the 1999
Convertible Notes, amounting to about HK$117 million, were
used to finance the acquisition from Hanny Holdings Limited
("Hanny") in October 1999 of certain shares in Tung Fong Hung
(Holdings) Limited under a put option granted by the Company
to Hanny in December 1997 for a total consideration of about
HK$195 million.
From the date of issue of the above convertible notes up to
the date of this announcement, none of the holders has
converted any of such convertible notes into Shares.
The respective shareholdings of Galaxyway in the Company
immediately before conversion of the Convertible Notes and
following full conversion of the Convertible Notes are as follows:
Upon full conversion
Upon full conversion Upon full conversion of
all the convertible Upon full conversion
Immediately before of the Convertible Notes of the
Convertible Notes notes of the Company of the
convertible notes
conversion of the (assuming the over-allotment
(assuming exercise of the (assuming the over-allotment
of the Company
Convertible Notes option is not exercised)
over-allotment option in full) option is not exercised)
by Galaxyway only
Galaxyway 171,621,911 Shares 285,907,625 Shares
285,907,625 Shares 331,362,170 Shares 331,362,170
Shares
(about 32.63%) (about 37.89%) (about 36.25%) (about
37.96%) (about 48.32%)
Public 354,338,863 Shares 468,624,577 Shares
502,910,291 Shares 541,671,228 Shares 354,338,863
Shares
(about 67.37%) (about 62.11%) (about 63.75%) (about
62.04%) (about 51.68%)
Total 525,960,774 Shares 754,532,202 Shares 788,817,916
Shares 873,033,398 Shares 685,701,033 Shares
Upon full conversion of the Convertible Notes (assuming the
over-allotment option is exercised in full) and assuming no
other issue of Shares will be made before such conversion,
the interests of Galaxyway in the issued ordinary share
capital of the Company will be increased from approximately
32.63 per cent. to approximately 36.25 per cent. Should such
event arise, Galaxyway will comply with the requirements
under the Hong Kong Code on Takeovers and Mergers.
Other than Galaxyway and Dr. Chan Kwok Keung, Charles, the
Company has not been notified of any other interests
representing 10 per cent. or more of the issued ordinary
share capital of the Company nor any interests of the
directors of the Company in the Shares as at the date of this
announcement.
REASONS FOR AND BENEFITS OF THE CONVERTIBLE NOTES ISSUE
The Convertible Notes Issue will raise funds for the Company
for the usage mentioned under the paragraph headed "Use of
proceeds" above. The directors of the Company have considered
and explored other financing options such as debt financing.
As the prevailing debt market climate is not favourable, the
Company considers that the Convertible Notes Issue is the
best option currently available to the Company to raise
additional funds for the Company which will also diversify
the Company's investor base without causing any immediate
dilution to the shareholding of the existing shareholders of
the Company. However, upon full conversion of the Convertible
Notes, the interests of the existing shareholders of the
Company taken as a whole, other than Galaxyway, will be
diluted by about 30.30 per cent. (assuming the over-allotment
option is not exercised and the existing shareholders of the
Company will not be interested in any of the Convertible
Notes) or by about 33.32 per cent. (assuming the
over-allotment option is exercised in full and the existing
shareholders of the Company will not be interested in any of
the Convertible Notes), and the interests of Galaxyway in the
Shares will be increased.
It is a condition for Tai Fook to agree to enter into the Convertible
Notes Placing Agreement that Galaxyway will simultaneously subscribe for
HK$200,000,000 Convertible Notes and completion of the Convertible Notes
Placing Agreement is conditional upon completion of the Convertible Notes
Subscription Agreement. Without the subscription of the Convertible Notes
by Galaxyway, the Convertible Notes Issue will not proceed.
The Company does not have any further plan to raise funds by way of equity
issue or the issue of convertible securities in the following 3 months
other than the Convertible Notes Issue.
CONNECTED TRANSACTION
The subscription of HK$200,000,000 Convertible Notes by Galaxyway under
the Convertible Notes Issue will constitute a connected transaction for
the Company under the Listing Rules. A special general meeting of the
Company will be convened to approve the Convertible Notes Issue. Galaxyway
and its associates will abstain from voting at the special general meeting
of the Company with regard to the resolutions proposed to approve the
Convertible Notes Issue.
The terms of the Convertible Notes Subscription Agreement and the
Convertible Notes Placing Agreement have been arrived at after arm's
length negotiations and are on normal commercial terms. The directors
(including the independent directors) of the Company consider the terms of
the above-mentioned agreements to be fair and reasonable and in the
interests of the Company and its shareholders taken as a whole.
An independent board committee of the Company will be appointed to advise
the independent shareholders of the Company in respect of the Convertible
Notes Issue. An independent financial adviser will be appointed to advise
the independent board committee on whether or not the terms of the
Convertible Notes Subscription Agreement are fair and reasonable and are
in the interests of the Company and its independent shareholders taken as
a whole.
GENERAL
An application will be made to the Listing Committee of the Stock Exchange
for the listing of, and permission to deal in, the new Shares to be issued
upon conversion of the Convertible Notes.
A circular containing, inter alia, details of the Convertible Notes
Subscription Agreement and the Convertible Notes Placing Agreement, the
advice from the independent financial adviser of the Company, the advice
from the independent board committee of the Company and notice convening
the special general meeting of the Company will be despatched to the
shareholders of the Company as soon as possible.
Shareholders are advised to exercise caution in dealing in the securities
of the Company.
By Order of the Board
Wong Lai Kin, Elsa
Company Secretary
Hong Kong, 21st January, 2000
The directors of the Company jointly and severally accept full
responsibility for the accuracy of the information contained in this
announcement and confirm, having made all reasonable enquiries, that to
the best of their knowledge and belief, opinions expressed in this
announcement have been arrived at after due and careful consideration and
there are no other facts not contained in this announcement the omission
of which would make any statement contained herein misleading.
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