TIDMASPL
RNS Number : 9043X
Aseana Properties Limited
07 May 2021
7 May 2021
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 Friday, 28 May 2021 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
https://data.fca.org.uk/#/nsm/nationalstoragemechanism .
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 3325 7050
Nick Paris (Chairman)
Liberum Capital Tel: 020 3100 2000
Darren Vickers / Owen Matthews
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, 2018 and 2019, in accordance
with the Company's articles of association then in force, the Board
put forward resolutions to Shareholders to determine if the Company
should continue in existence.
Most recently, at the general meeting held on 31 December 2019,
Shareholders again voted for the Company to continue in existence,
continuing to operate in accordance with the divestment investment
policy adopted by the Company at the 2015 AGM 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 that meeting, Shareholders also voted to approve 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 May 2021
(the "2021 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 which are to
be proposed at the General Meeting.
2 Company update
Divestment Investment Policy
The Company has realised gross sale proceeds of approximately
US$254 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 and a halt in early 2020 in order to advance the
demerger proposal. Renewed efforts began after July 2020 but were
hampered by the ongoing impact of COVID-19, and the resulting
reduction in buyer interest for hospitality assets, and the
inability of buyers to conduct due diligence on the ground.
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 was 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 2019 and 2020. With these new arrangements in
place, a new sales strategy was adopted and the Board has
prioritised the divestment of the Company's assets as soon as
possible to ensure that 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 2019. Since then numerous prospective
investors have been approached and non-disclosure agreements have
been signed with interested buyers in respect of three of the
Company's principal assets and active sale discussions continue on
them.
The Board is working to complete the next asset sales during Q2
and Q3 2021 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 as part of the preparation of the 2020 Accounts. The
portfolio revaluation is being conducted using a number of external
valuers (each a specialist in the relevant market of the relevant
asset).
Debt facilities
The Group currently has, in aggregate, approximately US$96
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 has re-negotiated 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.
Proposed demerger
As announced on 10 February 2021, the proposal to demerge
approximately 50 per cent. of the Company's assets could not
complete as a result of the failure to secure the required approval
from the banking syndicates who had lent the funds for the
construction of two of the Company's investments, the hospital in
Vietnam and the hotel and shopping mall in Sandakan. The demerger
agreements that had been signed on 15 July 2020 by the Company and
certain shareholders, including Ireka and Legacy Essence, therefore
lapsed.
3 2021 Discontinuation Resolution
Notwithstanding the obligation on the Board to propose the 2021
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 2021 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 2021
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 2021 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 2020 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.
The Board has determined that the next discontinuation vote
should take place in May 2023, which will allow the Board to
conclude, at the date of the 2020 Accounts which are expected to be
published in May 2021, that the Company is a going concern. For
this purpose, the next discontinuation vote should be scheduled for
a date at least 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 2020 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 2021 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 2021 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 2021 Discontinuation Resolution.
Instead, the Board recommends that Shareholders allow the
Company to continue for a further two years in order to allow the
divestment strategy to deliver results and sell the majority of the
Company's assets and to also 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 2020 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 2023.
The Board is clear that enabling the Company to continue to
pursue the Divestment Investment Policy, 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.
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 2023, 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
28 May 2021, is set out at the end of this document.
At the General Meeting, Resolution 1 (the 2021 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 2023) will be proposed,
conditional on the failure of Resolution 1 (the 2021
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
In view of the COVID-19 pandemic and the measures to restrict
travel and public gatherings currently in force, Shareholders are
strongly encouraged to exercise their votes on the matters of
business at the General Meeting by submitting a proxy appointment
and giving voting instructions as set out on the Form of Proxy.
Shareholders should only appoint the chairman of the General
Meeting as the Shareholder's proxy in order for the Shareholder's
vote to be counted.
Shareholder participation is important to us and 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 May 2021. We also encourage the submission of questions
to us in writing in advance of the General Meeting and, where
appropriate, those questions, and our answers to them, will be
published on our website http://www.aseanaproperties.com following
the General Meeting.
If you wish to submit a question about the Company or the
Proposals, please email me at nickparis@btinternet.com. We shall
publish the questions and answers on the Company website following
the General Meeting. The Company will not provide answers to
questions if (a) to do so would interfere unduly with the
preparation of the General Meeting or involve the disclosure of
confidential information, (b) the answer has already been given on
a website in the form of an answer to a question, or (c) it is
undesirable in the interests of the Company or the good order of
the General Meeting that the question be answered.
7 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 2021 Discontinuation Resolution) to
be proposed at the General Meeting and (2) FOR Resolution 2 (to
amend the Existing Articles).
Christopher Lovell, who is also a beneficial holder of 48,000
Shares in the Company, has confirmed that it is his intention vote
the Shares held in his name at the time of the General Meeting
accordingly.
Yours faithfully
Nicholas John Paris
Chairman
for and on behalf of
Aseana Properties Limited
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END
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