Source - RNS
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 at 30 June 2017

Adjustments to carrying value

Accrued interest

Amount


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. 

 

APPENDIX

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 "Issuer"

Fook Lam Moon Holdings Limited a company incorporated 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" or "Manager"

the investment manager of the Company from 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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