Hiap Seng Engineering is set to receive $16 million from an investor group led by integrated logistics solutions provider, Vibrant.
The move follows a non-binding term sheet that was signed by the company’s judicial managers and the investors on Dec 9.
The cash – which will be injected over two tranches – will form part of a restructuring exercise. The bailout, which can take place till Jul 31 2022, is subject to the approval of shareholders and regulators.
The deal with the investors is dependent on unsecured creditors approving a debt-for-equity swop in a scheme of arrangement.
Vibrant Equities, owned by the mainboard-listed Vibrant Group and two brothers who are majority shareholders of Vibrant plan to put up $6 million to subscribe for new shares in Hiap Seng, while Tian Yuan, the chief executive of construction company CGC Group, would contribute $2 million.
The investors would also get options to subscribe for new shares, which can be exercised at the subscription price in the first 12 months or at a 10% premium in the next 12 months.
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Vibrant Equities can hold as much as 48% of the enlarged share capital of Hiap Seng if the options are fully exercised in the first 12 month while Tian could own up to 16%.
Net proceeds from the planned subscription will be used to settle outstanding liabilities with Hiap Seng's key principal banker, which has security over assets such as properties, project receivables and cash. Meanwhile, net proceeds from the options will be used for working capital
The rescue investment hinges on a scheme of arrangement under which Hiap Seng will propose to settle some of its unsecured financial liabilities by issuing new ordinary shares and paying cash to those creditors.
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The company’s current management will also undertake to subscribe $1 million worth of shares in the rights issue as to show their commitment.
“We warmly welcome the proposed investment by the Vibrant-led investor group,” Richard Tan, CEO of Hiap Seng writes in a regulatory filing.
“Their proposed investment in Hiap Seng validates the strides the company has made in streamlining our operations, giving us a clearer focus on delivering quality services to our esteemed clientele. When the investment is completed, Hiap Seng will be able to grow again,” he adds.
Hiap Seng is looking to use the cash injection to invest in additional manpower and equipment. It will also explore the possibility of extending freight and logistics services to its clients in the oil and gas segment.
Once the restructuring is completed, Hiap Seng will undertake a rights issue exercise to raise up to $3 million. This serves to give existing shareholders an option to participate in the recapitalization of the company.
The company was placed under judicial management on Sept 15 2020.
Hiap Seng’s shares were trading at 2 cents, prior to its suspension in November 2019.
Shares in Vibrant Group closed flat at 9.2 cents on Dec 9, before the announcement.
Cover image: file photo
