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:


   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


for and on behalf of

Aseana Properties Limited

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May 07, 2021 03:39 ET (07:39 GMT)

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