By Ben Blaschke
NagaCorp CEO Dr Chen Lip Keong has informed the company of his intent to seek a concurrent conversion of his TSCLK Complex Convertible Bonds and NagaCity Walk Convertible Bonds, paving the way for the approval of a whitewash waiver at the upcoming EGM on 21 July which would give him majority stake in the company.
NagaCorp announced in March that Dr Chen was looking to gain control of the company by exercising conversion rights in respect to TSCLK Complex Convertible Bonds issued to him in December. He had previously been issued the NagaCity Walk Convertible Bonds in May 2016 as consideration for the acquisition of the NagaCity Walk Project.
In a filing to the Hong Kong Stock Exchange late Friday, NagaCorp said it had “received a revised notice from Dr Chen that after careful consideration of the market responses, he (i) had decided to concurrently exercise the conversion rights in respect of both the TSCLK Complex Convertible Bonds in full in the outstanding aggregate principal amount of US$275,000,000 and the NagaCity Walk Convertible Bonds in full in the outstanding aggregate principal amount of US$94,000,000.”
It also said that Dr Chen had “agreed to voluntarily waive his entitlement to the adjusted conversion price under the NagaCity Walk Convertible Bonds as a result of the conversion of the TSCLK Complex Convertible Bonds which would otherwise apply under the relevant bond instruments, such that the conversion price under the NagaCity Walk Convertible Bonds would also be HK$1.53 instead of a conversion price of HK$0.66 which would otherwise apply under the relevant bond instruments.”
The concurrent conversion would see Dr Chen’s stake in the company increase from 39.98% to 65.42%, as opposed to a possible 69.83% stake under a staggered conversion.
The TSCLK Complex Convertible Bonds were originally issued to Mr Chen last year following the acquisition of his former company TSC Inc by NagaCorp. TSC holds the rights to the neighboring TSCLK Complex, better known as Naga2, which is due to open later this year. The NagaCity Walk Convertible Bonds relate to a separate deal which saw NagaCorp acquire City Walk Inc, the holding company for the NagaCity Walk project that will connect NagaWorld with Naga2.
In a Sunday note, Union Gaming’s Grant Govertsen said the concurrent conversion of bonds made it “significantly more likely that the whitewash waiver will be approved at the July 21st EGM.”
“While [the whitewash waiver] still requires shareholder approval the announcement of a concurrent conversion removes the single largest overhang on shares of Naga and we therefore expect shares to rebound sharply in the near-term,” Govertsen added.
