TIDMADAM
RNS Number : 0131K
Adamas Finance Asia Limited
05 April 2018
ADAMAS FINANCE ASIA LIMITED
DISPOSAL OF INTERESTS IN SELECTED ASSETS AND NOTICE OF GENERAL
MEETING
The Directors of ADAM are pleased to announce the proposed
disposal of the Company's interests in a significant portion of its
legacy portfolio, referred to in this announcement as the "Sale
Portfolio" and comprising China iEducation, CPE Finance, CPE Growth
Capital, CPE TMT and the Fortel Loan.
As previously announced, the Board and the Investment Manager
have been exploring ways of realising value from the legacy
portfolio. The proposed Disposal represents a significant step in
that process and will enable the Company to pursue its current
Investing Policy, which is focused on growth and income
opportunities.
When aggregated with other disposals made by the Company during
the previous twelve months, the assets which are the subject of the
Disposal represent more than 75% of the gross assets of the
Company. Accordingly, in accordance with AIM Rule 15 of the AIM
Rules and paragraph 5.6 of the AIM Note for Investing Companies, as
the Disposal is not within the Company's current Investing Policy,
it is subject to the approval of Shareholders. The Company is
therefore convening the General Meeting at which the Resolution
will be proposed to approve the Disposal.
Terms of the Transaction
Assignment and Assumption Agreement
On 4 April 2018, the Company entered into a conditional
agreement with Fook Lam Moon pursuant to which it will assume and
take assignment of the Company's interests in the Sale Portfolio
(the "Assignment and Assumption Agreement"). As consideration for
the Disposal, the Company will be issued the Convertible Bond by
the Issuer, which, upon completion of the Restructuring, will be
the controlling shareholder of a long-established and well known
Hong Kong-based food and beverage business primarily operating
high-end Chinese restaurants. Further information on the Issuer is
set out in the Appendix below.
Completion of the Assignment and Assumption Agreement is
conditional, inter alia, on the passing of the Resolution and
satisfaction of the Restructuring Condition.
Consideration
The consideration for the Disposal is US$26.5 million in
aggregate, equivalent to (i) the carrying value of the Company's
interest in the Sale Portfolio as reported in its unaudited half
yearly accounts for the six months ended 30 June 2017; (ii)
increases in the carrying value of certain positions up to and
including 31 December 2017 (unaudited); and (iii) accrued interest
up to and including 31 December 2017.
Asset Carrying value Adjustments Accrued interest Amount
at 30 June to carrying
2017 value
US$m US$m US$m US$m
China EDU 4.0 - - 4.0
CPE TMT and the Fortel
Loan 12.7 - 0.8 13.5
CPE Finance 4.4 - 0.2 4.6
CPE Growth Capital 3.4 1.0 - 4.4
Total 24.5 26.5
Form of Consideration
The consideration for the Disposal will be the issue to the
Company of the Convertible Bond. The principal features of the
Convertible Bond are:
-- maturity: 5 years
-- coupon: 5.0% per annum (3.0% paid in cash payable quarterly
with the remainder rolled up with the principal amount
outstanding)
-- redemption:
-- by the Issuer at any time after the third anniversary of the
date of issue and prior to maturity at a price equal to the
outstanding principal and accrued interest together with a cash
premium; and
-- by the Company on (i) the occurrence of an IPO or change of
control of the Issuer ("Exit Event"); (ii) at maturity; or (iii)
upon the occurrence of an event of default, in each case at a price
equal to outstanding principal and accrued interest
-- conversion: by the Company into shares in the capital of the
Issuer either (i) upon an Exit Event; or (ii) at any time after 31
January 2021. In the case of the Company deciding to exercise its
conversion right upon an Exit Event, the conversion price will
depend on when such Exit Event takes place and is either referable
to the valuation of the Issuer upon such exit or will be based on
agreement between the Issuer and the Company and in default of
agreement, by carrying out an independent valuation process
-- security: unsecured but contains a negative pledge in favour of the Company
-- other protections: market standard adjustment provisions in
the event of any changes in the share capital of the Issuer
The Company intends to retain the Convertible Bond for the
foreseeable future and it will either be redeemed at maturity or
converted between three and five years. Because the Company has the
option to either redeem or convert the Convertible Bond upon the
occurrence of an Exit Event and the Issuer can only redeem the
Convertible Bond after three years of its issue at a premium to
outstanding principal, the Company retains the ability to ensure
that the minimum return under the Convertible Bond at any time is
its outstanding principal amount and accrued interest.
Sale Portfolio
Details of the assets forming the Sale Portfolio are as
follows:
CPE EDU/China iEducation
The Group owns a 40% equity interest in China iEducation via a
100% shareholding in CPE EDU. China iEducation is engaged in
developing and distributing digital education content. In the year
ended 31 December 2017, China iEducation reported a net loss of
US$4,224 (unaudited).
CPE TMT/Fortel
The Group previously owned a 33.6% holding in Fortel. As
announced on 6 October 2016, the investment was restructured, the
result of which was that CPE TMT held a loan of US$11.3 million due
from Mr. David Chen and Ms. Zhong Ying Ying, the owners of the
I-Buying business which was previously part of Fortel. The loan has
a term of three years, a coupon of 3% in the first year and 8%
thereafter. The Group owns 100% of CPE TMT. In addition, the
Company is the counterparty to the Fortel Loan, the benefit of
which will be assigned to the Issuer pursuant to the terms of the
Assignment and Assumption Agreement and a separate deed of
assignment between the Company, the Issuer and Fortel.
CPE Finance/Orbrich
The Group, through its 100% shareholding in CPE Finance, is the
counterparty to two outstanding loans due from Orbrich with an
aggregate principal value of US$3.5 million. Orbrich is a financial
services company based in Tianjin, China offering factoring finance
and private loan guarantee services to small-to-medium sized
businesses in China.
CPE Growth Capital
The Group holds a US$4.4 million equity investment in CPE Growth
Capital, which is engaged in conducting secondary market
investments on the Malaysian Stock Exchange.
Circular
The Company will today post a circular to Shareholders convening
the General Meeting to be held on 26 April 2018 at 10.00 a.m. BST /
5.00 p.m. HKT at which the Resolution will be proposed.
Recommendation
The Board considers that the Resolution to be put to the General
Meeting is in the best interests of the Company and its
Shareholders as a whole. Accordingly, the Directors unanimously
recommend that all Shareholders vote in favour of the Resolution,
as John Croft (the only Director who holds Ordinary Shares) intends
to do in respect of his own beneficial holding, comprising 14,850
Ordinary Shares, representing approximately 0.02% of the existing
issued share capital of the Company.
John Croft Chairman of Adamas Finance Asia commented:
"This is an exciting development for the Company and marks a
considerable turning point for Adamas Finance Asia since the
appointment of our new Investment Manager, Harmony Capital, in May
2017. It is a milestone disposal of a material part of our 'legacy
portfolio' which has been one of the major objectives of the Board
and the new Manager. Since the appointment of Harmony Capital, this
transaction, once completed, will mean that over 80% of our
portfolio has either been disposed of or restructured in accordance
with our Investing Policy. Moreover, the transaction enables access
to the dynamic Asian food and beverage sector through a convertible
bond which will generate income and potential capital growth for
the Company over a five year period."
Enquiries:
Adamas Finance Asia Limited
John Croft +44 (0)1825 830587
Nominated Adviser
WH Ireland Limited
Tim Feather
James Sinclair-Ford +44 (0) 113 394 6600
Broker
finnCap Limited
William Marle
Grant Bergman +44 (0) 20 7220 0500
Public Relations Advisers
Buchanan
Charles Ryland
Henry Wilson +44 (0) 20 7466 5000
About Adamas Finance Asia ("ADAM")
ADAM is a London quoted investment company focusing on
delivering long-term income and capital growth to shareholders
through a diverse portfolio of pan-Asian investments. It aims to
provide uncorrelated returns through a combination of capital
growth and dividend income from a broad spectrum of national
geographies and asset classes.
The Company's investment manager, Harmony Capital, which has a
dedicated team with real Asian expertise, is focused on the
strategy of creating income and capital growth. Harmony is sourcing
predominantly private opportunities and has created a strong
pipeline. Income generating assets include investments in property,
mining, pharmaceuticals, and telecoms across Asia.
APPIX
The Issuer
The Issuer is a newly incorporated special purpose vehicle, set
up as part of a wider concurrent restructuring exercise being
undertaken by Chinese Food and Beverage Group Limited ("CFBG"),
which is a Hong Kong listed restaurant, food and beverage business.
Prior to completion of the restructuring, CFBG's subsidiaries owned
a substantial interest in the assets and business comprising the
Fook Lam Moon restaurant business, being the Hong Kong restaurants
in Wanchai and Kowloon (including the freehold interest in those
properties), related intellectual property and management companies
and certain other real estate holdings in Hong Kong. These assets
are held in three Hong Kong companies (the "FLM Group").
As a result of the Restructuring and related transactions, the
Issuer will, on completion of that exercise, indirectly own 81% of
the FLM Group (the "FLM Holding"), the other 19% being held
indirectly by CFBG. There will be a shareholders' agreement
between, inter alia, the Issuer and a 100% owned subsidiary of CFBG
which holds its 19% interest in the FLM Group.
Based on information contained in CFBG's circular to
shareholders of 28 February 2018 setting out the terms of the
Restructuring, the adjusted and unaudited net asset value of the
FLM Holding as at 30 June 2017 was approximately HK$358.06
million.
By reference to the consideration payable pursuant to the terms
of the Restructuring, the value of the FLM Holding is HK$454.43
million.
DEFINITIONS
"AIM" the market of that name operated by the London
Stock Exchange
"AIM Rules" the AIM Rules for Companies as published by
the London Stock Exchange
"BST" British Summer Time
"BVI" British Virgin Islands
"China iEducation" China iEducation Holdings Limited, a company
incorporated in the BVI with registered number
571091
"Company" or "ADAM" Adamas Finance Asia Limited, a company registered
in the BVI with registered number 1459602
"Convertible Bond" the convertible bond with a principal amount
of US$26.5 million to be issued to the Company
by Fook Lam Moon as consideration for the
Disposal
"CPE Companies" CPE Growth Capital, CPE TMT, CPE EDU and CPE
Finance
"CPE EDU" CPE EDU Holdings Limited, a company registered
in the BVI with registered number 1820851
"CPE Finance" CPE Finance Limited, a company incorporated
in the BVI with registered number 1820858
"CPE Growth Capital" CPE Growth Capital Limited, a company incorporated
in the BVI with registered number 17090460
"CPE TMT" CPE TMT Holdings Limited, a company incorporated
in the BVI with registered number 1499685
"Fook Lam Moon" or Fook Lam Moon Holdings Limited a company incorporated
"Issuer" in the BVI with registered number 583002
"Fortel" Fortel Technology Holdings Limited, a company
incorporated in the BVI with registered number
528497
"Fortel Loan" a loan made pursuant to a loan agreement dated
30 June 2014 (as subsequently extended) from
the Company to Fortel in the principal sum
of US$1 million and which, inclusive of interest
to date is now in the outstanding amount of
US$1.3 million
"General Meeting" the general meeting of the Company to be held
at 10.00 a.m. BST/ 5.00 p.m. HKT time on 26
April 2018
"Group" the Company and its subsidiaries from time
to time
"HKT" Hong Kong Time
"Investing Policy" the investing policy of the Company from time
to time
"Investment Manager" the investment manager of the Company from
or "Manager" time to time
"London Stock Exchange" London Stock Exchange plc
"Orbrich" Orbrich Group Limited, a company incorporated
in the BVI with registered number 540846
"Ordinary Shares" ordinary shares of no par value each of the
Company
"Resolution" the resolution proposed in the Notice of General
Meeting at the end of this document
"Restructuring" the restructuring of Chinese Food and Beverage
Group Limited (8272.HK), further details of
which are set out under the heading "The Issuer"
in paragraph 2 of the letter from the Non-Executive
Chairman
"Restructuring Condition" Fook Lam Moon obtaining an indirect interest
of at least 50 per cent in the special purpose
vehicle which will own the Fook Lam Moon Business
upon completion of the Restructuring
"Sale Portfolio" the shares in each of the CPE Companies and
the Fortel Loan
"Shareholder(s)" holder(s) of Ordinary Shares
"US$" US dollars
This information is provided by RNS
The company news service from the London Stock Exchange
END
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