NutryFarm International Announces Major Share Conversion Deal with Corpbond IV Ltd

Key Highlights

• NutryFarm International Limited has entered into a Share Conversion Agreement (SCA) with Corpbond IV Ltd, during the period under judicial management, to convert outstanding debt into equity.
• The conversion involves the potential issue of up to 1.89 billion new shares in two tranches, which will significantly dilute existing shareholders and result in Corpbond IV Ltd becoming the controlling shareholder.
• The deal is subject to multiple shareholder and regulatory approvals, including waivers under the Singapore Code on Takeovers and Mergers.
• The transaction constitutes an interested person transaction under SGX rules, as Mr. Niu Liming, NutryFarm’s Executive Director, is also the sole director and a major shareholder of the investor, Corpbond IV Ltd.

Detailed Summary of the Share Conversion Agreement (SCA)

Background and Rationale

The SCA is a key component of NutryFarm’s restructuring plan, aiming to fully discharge a total debt of S\$34.27 million owed to Corpbond IV Ltd and related creditors. The move is intended to strengthen the company’s balance sheet by converting debt into equity and facilitate the company’s recovery post-judicial management.

The conversion will be implemented in two stages to comply with the SGX public float requirement, ensuring at least 10% of the company’s shares remain with the public.

Terms of the Conversion

• Tranche 1: Capitalisation of S\$27.37 million of debt by issuing up to 1,236,798,927 new shares at S\$0.022 per share (Pre-Resumption Conversion Shares).
• Tranche 2: Remaining S\$6.90 million of debt to be converted into shares at a price not more than a 10% discount to the last trading day’s weighted average price before the subscription agreement is signed (Post-Resumption Conversion Shares).

Impact on Shareholding Structure

Key takeaway: The investor, Corpbond IV Ltd, will own up to 93.23% of the company after the conversion, drastically diluting minority shareholders and transferring controlling interest.

Financial Effects

• Net Asset Value (NAV) per share improves significantly post-conversion, from a negative HK\$1.48 per share to negative HK\$0.04 per share after both tranches, reflecting the reduction in liabilities.
• Loss per Share (LPS) is diluted due to the enlarged share capital, dropping from HK\$0.506 to HK\$0.029 after both tranches.
• No cash proceeds will be raised; all shares are issued in consideration for the discharge of debt.

Approvals and Regulatory Matters

• Requires shareholder approval under several SGX Listing Manual rules (Chapters 9, 803, 804, 805(1), 812), as well as a Whitewash Resolution to waive the mandatory general offer obligation under the Singapore Code on Takeovers and Mergers.
• Interested parties (Mr. Niu Liming and associates) will abstain from voting on relevant resolutions.
• An independent financial adviser will be appointed to assess the fairness of the transaction for minority shareholders.
• The transaction must be completed by 31 December 2025, or such later date as may be agreed.

Important Information for Shareholders

• Severe Dilution: Existing shareholders will see their holdings diluted to less than 5% in aggregate after the conversion. This is a critical event that will impact the value of existing shares.
• Change of Control: Corpbond IV Ltd, controlled by the company’s Executive Director, will become the controlling shareholder, raising potential governance and alignment considerations.
• Trading Caution: Completion of the transaction is subject to multiple uncertain conditions, and there is no certainty it will proceed as planned.
• Resumption of Trading: Shares have been suspended since April 2022. The deal is positioned as a step towards restructuring and potential resumption of trading, but this is not assured.
• Shareholder Meeting: A circular with further details and the date of the extraordinary general meeting (EGM) for shareholder approval will be dispatched in due course.

Potential Share Price Implications

This announcement is highly price-sensitive due to its transformative impact on the company’s capital structure, change of control, and dilution of existing shareholders. Investors should monitor the outcomes of the required approvals, the appointment of the independent financial adviser, and any further announcements regarding the resumption of trading or restructuring progress.

Disclaimer

This article is for informational purposes only and does not constitute investment advice. The completion of the share conversion is subject to shareholder and regulatory approvals and is not guaranteed. Investors are advised to read all company announcements and consult their professional advisers before making any investment decisions.

View NutryFarm Historical chart here