Entertainment company mm2 Asia has confirmed it is raising $54 million by issuing exchangeable bonds to UOB Kay Hian carrying a coupon of 5% for a three-year term.
Under terms of the bond deal, first announced back in June 16, UOB Kay Hian can convert the bonds into shares of mm Connect group, the subsidiary of mm2 Asia which owns, operates, and manages cinemas including the Cathay Cineplexes and mmCineplexes brands in Singapore and Malaysia.
“The successful signing of this exchangeable bond deal indicates the confidence and belief in the strong recovery and fundamentals of our cinema business and the mm2 group in general,” says Melvin Ang, mm2 Asia’s executive chairman.
“We want to thank the team at UOB Kay Hian for their trust in us to turn around and grow the cinema business in Singapore and Malaysia. We cannot wait to share the long-term plans and new business innovations we have in store with all our stakeholders,” he adds.
Under terms of the bond issue, if UOB Kay Hian chose to exchange the bonds at the end of the second year, it will receive shares of mm Connect constituting 60% of the share capital, at a base valuation of $90 million.
The exchange ratio is subject to adjustment – with the valuation potentially raised to S$105 million if certain benchmarks are met in relation to mm Connect group’s EBITDA performance for the 24-month period ending September 30 2024.
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At the valuation cap of $105 million, the bondholdes are to invest an additional $9 million, or exercise the exchange right at 51.4% of mm Connect shares.
Bonds that are not exchanged into mm Connect shares will be fully redeemed in cash. Or, mm2 Asia may choose to pay back the $54 million by delivering 100% equity of mm Connect at the end of the tenure.
In addition, the bonds are issued together with 250 million detachable warrants, each carrying a five-year right from the issue date of the bond to subscribe for one new ordinary share of mm2 Asia at 6.5 cents each.
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If the warrants are fully exercised, mm2 Asia will raise another $16.25 million.
According to mm2 Asia, this bond deal does not preclude itself from continuing to pursue an IPO of its cinema business at a pre-IPO valuation of at least $150 million, provided the bondholder can exchange for more than 50% of mm Connect shares at the enlarged share capital post-IPO without making additional investments.
This fund-raising deal is subjected to approval from SGX and mm2’s own shareholders at an EGM to be called.
Mm2 Asia shares last traded at 4.8 cents before a trading halt was called before the market opened on Sept 23. The shares will resume trading on Sept 26.
