(Oct 28 2011)
Bergen-based parcel tanker owner and operator Odfjell is to manage its entire fleet using Veson Nautical’s IMOS (Integrated Maritime Operations System).
I*n addition, the company will be installing Veslink, Veson's automated system for ship-to-shore communications.
Odfjell’s shipping division - Odfjell Tankers - operates a fleet of about 100 chemical tankers, ranging in size from 4,000 dwt to almost 50,000 dwt.
When Odfjell’s management decided to replace the company’s in-house software system with a fully integrated solution, they short listed companies that could address Odfjell’s biggest ‘pain points.’
The management sought to automate routine tasks, streamline communications between departments, increase productivity and to use real-time voyage data to make the most profitable decisions.
Einar Øye, Odfjell’s senior project manager, explained; “From our first meeting, the Veson team demonstrated an in-depth understanding of our business processes and a holistic and advanced approach to voyage management and software design. That combination was an important factor when we chose Veson.”
John Veson, president of Veson Nautical said; “We are excited that the combination of IMOS and Veslink will bring unprecedented connectivity to the company’s entire operations, from vessels and crew on board, to onshore staff and external service providers.
"The Odfjell team has a sophisticated understanding of how advanced software can help control costs and create profit, and we look forward to a long and productive partnership,” he said.
Odfjell has begun the implementation phase and expects to go live with IMOS by the end of 2012 for the shore based organisation, including about 15 global sites, while Veslink is scheduled to be deployed on board 100 vessels. The company is also integrating IMOS into its corporate accounting package.
Øye concluded; “IMOS and Veslink give us the ability to capture voyage related information at the source and automatically utilise that information throughout our work processes. It’s our goal to provide Odfjell employees with tools which enable them to easily access information relevant to their work. We believe the Veson solution supports this goal and this will be incredibly beneficial for us.”
Friday 28 October 2011
Wednesday 26 October 2011
Why do institutional investors stay away from small cap companies?
This is always a question when someone is doing an IPO or other fund raising exercise. This is especially so when they have a very good story to tell but small number of investors turn up. This is always a problem for smaller cap companies. Why?
The reasons is probably as follows:
1. Every investor's appetite is different. An investor with US$200mio of funds on hand would want at least US$5mil of investment to call it sizeable. they do not want to invest in a small company with say market cap of $10mil. Their position will be too significant where they can not get out so easily. That's why certain investor wants to invest in a company with a certain minimum amount of market cap. In the case for smaller company, it should find investor with relatively smaller size and appetite of investment amount and works its way from small cap to mid cap to get the attention of the investors. Some really small cap must concentrate on retail investors only.
2. Every investor has his/her own compliance office. He needs to consult with his/her compliance office and if he fails to do so then the investment will be scrapped no matter how good and potential the project is.
3. Some investors avoid investing in small cap because of their perceived lack of quality of small cap companies. Some of the belief are as follows:
a. lack of transparency of management
b. lack of adequate research by fund houses and brokers
c. lack of financial muscle
d. low liquidity
e. high volatility
The management must work hard to deliver values and continue to comply with the good governance to avoid the above perception. One thing to remember is that many of the larger cap companies nowadays are small cap 10 or 15 years ago.
4. The Company' share is not liquid enough to buy. Investors sometime require that the company would have certain minimum average trading volume so that their entering and exiting strategy would not be so difficult. The company management should continue to deliver liquidity in the market and performing frequent corporate actions which give value to investors.
5. In many cases for small cap, management is too busy concentrating on operation and they can not look after investor relations and proper communication of plans.
just some of my thought today....
Cheers,
SS
The reasons is probably as follows:
1. Every investor's appetite is different. An investor with US$200mio of funds on hand would want at least US$5mil of investment to call it sizeable. they do not want to invest in a small company with say market cap of $10mil. Their position will be too significant where they can not get out so easily. That's why certain investor wants to invest in a company with a certain minimum amount of market cap. In the case for smaller company, it should find investor with relatively smaller size and appetite of investment amount and works its way from small cap to mid cap to get the attention of the investors. Some really small cap must concentrate on retail investors only.
2. Every investor has his/her own compliance office. He needs to consult with his/her compliance office and if he fails to do so then the investment will be scrapped no matter how good and potential the project is.
3. Some investors avoid investing in small cap because of their perceived lack of quality of small cap companies. Some of the belief are as follows:
a. lack of transparency of management
b. lack of adequate research by fund houses and brokers
c. lack of financial muscle
d. low liquidity
e. high volatility
The management must work hard to deliver values and continue to comply with the good governance to avoid the above perception. One thing to remember is that many of the larger cap companies nowadays are small cap 10 or 15 years ago.
4. The Company' share is not liquid enough to buy. Investors sometime require that the company would have certain minimum average trading volume so that their entering and exiting strategy would not be so difficult. The company management should continue to deliver liquidity in the market and performing frequent corporate actions which give value to investors.
5. In many cases for small cap, management is too busy concentrating on operation and they can not look after investor relations and proper communication of plans.
just some of my thought today....
Cheers,
SS
Tuesday 25 October 2011
Capital Increase Without Pre-emptive Rights IV
Hello All,
We have come to the final discussion on the above topic which will be on the requirement for shareholders approval with regard to the debt to equity conversion and part of the Capital Increase Without Pre-emptive Rights.
Well, as requested under the capital market authority, this kind of transaction is subject to shareholders' approval. The procedure for the EGM is basically the same as in any corporate actions in which EGM Announcement should be done 14 days prior to the EGM Notice and the EGM Notice must be done 14 days prior to the EGM.
One thing to note for the creditor about the debt to equity conversion is about the lock up period. Those creditors that receives the shares in consideration of the debt converted must be subject to a lock up period of 1 (one) year from the moment the shares are listed on the exchange. This is regulated under the Exchange and intended to mitigate sudden significant decline in the share price of such company following the provision of the shares to creditors especially considering the size of the shares issued which at times can be substantial and more than the existing shares. For example: the debt to equity conversion conducted by Langgeng Makmur Industry and Sekar Laut in 2005 where the shares outstanding in the market suddenly increase by 91% and 814% due to such undertaking. On the debt to equity conversion by Surabaya Agung in 2007 the outstanding shares increased by close to 1,100% from the existing outstanding shares.
Okay now. Seems we have covered some issues on the debt to equity conversion. lets see if we can discuss other more interesting matters in the coming weeks.
Chao....
SS
We have come to the final discussion on the above topic which will be on the requirement for shareholders approval with regard to the debt to equity conversion and part of the Capital Increase Without Pre-emptive Rights.
Well, as requested under the capital market authority, this kind of transaction is subject to shareholders' approval. The procedure for the EGM is basically the same as in any corporate actions in which EGM Announcement should be done 14 days prior to the EGM Notice and the EGM Notice must be done 14 days prior to the EGM.
One thing to note for the creditor about the debt to equity conversion is about the lock up period. Those creditors that receives the shares in consideration of the debt converted must be subject to a lock up period of 1 (one) year from the moment the shares are listed on the exchange. This is regulated under the Exchange and intended to mitigate sudden significant decline in the share price of such company following the provision of the shares to creditors especially considering the size of the shares issued which at times can be substantial and more than the existing shares. For example: the debt to equity conversion conducted by Langgeng Makmur Industry and Sekar Laut in 2005 where the shares outstanding in the market suddenly increase by 91% and 814% due to such undertaking. On the debt to equity conversion by Surabaya Agung in 2007 the outstanding shares increased by close to 1,100% from the existing outstanding shares.
Okay now. Seems we have covered some issues on the debt to equity conversion. lets see if we can discuss other more interesting matters in the coming weeks.
Chao....
SS
Friday 21 October 2011
Ocean Tankers' in Difficulty
Ocean Tankers' assets go under the hammer(Oct 21 2011)
Another vessel operated by Cyprus-based Ocean Tankers and managed by Admibros is to be auctioned.
According to Lloyd’s List, the 1998-built 15,558 dwt chemical tanker ‘Anefani’ is to go under the hammer before the Rotterdam district court on November 22, on an ‘as is, where is’ basis, at the request of Royal Bank of Scotland, Dutch law firm AKD Prinsen van Wijmen confirmed to the daily shipping newspaper.
It was thought that the crew claimed nearly $200,000 on back wages, leading to a judgement to sell the vessel.
Earlier this week, the UK Admiralty Marshall opened bidding on the 1997-built, 15,885 dwt sister vessel ‘Frachtis’, currently lying off Falmouth, which had also been arrested.
Towards the end of last month, Lloyd’s List established that 1999-built, 14,441 dwt ‘Skledros’ and her sistership ‘Hartzi’ were being held off Skagen. The 2007 -built, 4,285 dwt ‘Marim’ was also being held in Rotterdam, while the 1999-built, 19,831 dwt ‘Eleousa Trikoukiotisa’ was lying in Ghent.
In addition, the 2001-built, 19,831 dwt, ‘Berengaria’ was alongside Gibraltar’s detached mole awaiting her fate, during Tanker Operator’s visit to the Rock last week.
Taken from Tanker Operator
www.chemicaltankers.blogspot.com
Another vessel operated by Cyprus-based Ocean Tankers and managed by Admibros is to be auctioned.
According to Lloyd’s List, the 1998-built 15,558 dwt chemical tanker ‘Anefani’ is to go under the hammer before the Rotterdam district court on November 22, on an ‘as is, where is’ basis, at the request of Royal Bank of Scotland, Dutch law firm AKD Prinsen van Wijmen confirmed to the daily shipping newspaper.
It was thought that the crew claimed nearly $200,000 on back wages, leading to a judgement to sell the vessel.
Earlier this week, the UK Admiralty Marshall opened bidding on the 1997-built, 15,885 dwt sister vessel ‘Frachtis’, currently lying off Falmouth, which had also been arrested.
Towards the end of last month, Lloyd’s List established that 1999-built, 14,441 dwt ‘Skledros’ and her sistership ‘Hartzi’ were being held off Skagen. The 2007 -built, 4,285 dwt ‘Marim’ was also being held in Rotterdam, while the 1999-built, 19,831 dwt ‘Eleousa Trikoukiotisa’ was lying in Ghent.
In addition, the 2001-built, 19,831 dwt, ‘Berengaria’ was alongside Gibraltar’s detached mole awaiting her fate, during Tanker Operator’s visit to the Rock last week.
Taken from Tanker Operator
www.chemicaltankers.blogspot.com
Saga Tankers pushes the exit button
Saga Tankers pushes the exit button(Oct 21 2011)
Saga Tankers is to withdraw from shipping and sell its remaining VLCCs.
A proposal to cease shipping operations will be put to an extraordinary general meeting to be held on 10th November.
Saga Tankers has already agreed the sale of the VLCCs ‘Saga Julie’ and ‘Saga Agnes’ (built 2000) to Greek interests for $30.5 mill net each. The sale of the ‘Saga Julie’ is outright and free from any subjects, while the sale of the ‘Saga Agnes’ is subject to approval of Saga Tankers’ general meeting.
The full sales proceeds from both vessels, plus the value of bunkers and lubes, will be used to deleverage the company. The first vessel will be delivered to the buyer during November 2011, while the second will be delivered upon completion of her timecharter in July/August 2012.
The buyer will lodge a deposit of 15% of the sales price in a joint account until the vessel is delivered.
As a result, Saga Tankers will make an extraordinary repayment under its loan facility of $13 mill. Following the sale of the vessels and repayments of the loan, total outstanding debt under the company's loan facility will be $21 mill attributable to the company's remaining VLCC, ‘Saga Agnes’.
The loan will be amortised by $1.2 mill per quarter until delivery in July/August 2012.
In the third quarter 2011 financial report, the company said that it will make a write down on the book value of ‘Saga Julie’ of $27.5 mill following the sale, and the same amount following the forward sale of ‘Saga Agnes’.
The sale of ‘Saga Unity’, reported in Tanker Operator news of 17th October, will result in a write down of $28.6 mill.
Saga Tankers said that the steps taken following the decline in ship values saved the company from breaching financial covenants under its loan agreement. As a result, the company is no longer in discussions with its lenders over its debts.
The board said that it unanimously recommended the general meeting to approve the sale of ‘Saga Agnes’. Following the sale, the company will no longer be involved in shipping.
The sale will only be completed if two thirds of the votes cast are in favour of the proposal, the company pointed out.
Following the completion of a potential sale of the vessel ‘Saga Agnes’, the board said that it will make proposals regarding the company's future business and operations.
This may relate to the development of a new strategy, a change of the description of the business in the articles of association since it will no longer be engaged in the shipping business, or possibly dissolve the company and consequently pay out shareholder values as a dividend.
Saga Tankers is to withdraw from shipping and sell its remaining VLCCs.
A proposal to cease shipping operations will be put to an extraordinary general meeting to be held on 10th November.
Saga Tankers has already agreed the sale of the VLCCs ‘Saga Julie’ and ‘Saga Agnes’ (built 2000) to Greek interests for $30.5 mill net each. The sale of the ‘Saga Julie’ is outright and free from any subjects, while the sale of the ‘Saga Agnes’ is subject to approval of Saga Tankers’ general meeting.
The full sales proceeds from both vessels, plus the value of bunkers and lubes, will be used to deleverage the company. The first vessel will be delivered to the buyer during November 2011, while the second will be delivered upon completion of her timecharter in July/August 2012.
The buyer will lodge a deposit of 15% of the sales price in a joint account until the vessel is delivered.
As a result, Saga Tankers will make an extraordinary repayment under its loan facility of $13 mill. Following the sale of the vessels and repayments of the loan, total outstanding debt under the company's loan facility will be $21 mill attributable to the company's remaining VLCC, ‘Saga Agnes’.
The loan will be amortised by $1.2 mill per quarter until delivery in July/August 2012.
In the third quarter 2011 financial report, the company said that it will make a write down on the book value of ‘Saga Julie’ of $27.5 mill following the sale, and the same amount following the forward sale of ‘Saga Agnes’.
The sale of ‘Saga Unity’, reported in Tanker Operator news of 17th October, will result in a write down of $28.6 mill.
Saga Tankers said that the steps taken following the decline in ship values saved the company from breaching financial covenants under its loan agreement. As a result, the company is no longer in discussions with its lenders over its debts.
The board said that it unanimously recommended the general meeting to approve the sale of ‘Saga Agnes’. Following the sale, the company will no longer be involved in shipping.
The sale will only be completed if two thirds of the votes cast are in favour of the proposal, the company pointed out.
Following the completion of a potential sale of the vessel ‘Saga Agnes’, the board said that it will make proposals regarding the company's future business and operations.
This may relate to the development of a new strategy, a change of the description of the business in the articles of association since it will no longer be engaged in the shipping business, or possibly dissolve the company and consequently pay out shareholder values as a dividend.
Thursday 20 October 2011
Capital Increase Without Pre-emptive Rights III
Okay, in the previous discussion we have covered the two criteria for an eligible debt to equity conversion being part of the Capital Increase Without Pre-emptive Rights. One being the type of company that is allowed to do the debt to equity conversion, second is the type of debt that can be converted and as to whether the interest, coupon and penalty from the debt is part of the amount eligible for conversion.
Now in this session, I am going to cover the determinant for the conversion price.
One thing to also note in the debt to equity conversion when performing this capital increase without pre-emptive rights is to consider how much debt that can be converted into share and by how many shares. The debtor has the interest of making sure his money worth as many shares as possible while the creditor prefers to part way with as little shares as possible. The good news is, there is a mechanism to address this.
The other thing to consider is the share price of the company. In any typical scenario, normally the share price of this kind of company is pretty low and as one can imagine, the lower the share price of such public company, the more shares the creditor have to forgo its shares to the party it owes to in order to pay down the debt. This in turn will result in higher dilution effect to the other existing shareholders.
Due to this dilution effect and in order to mitigate minority shareholders being unnecessarily worse off due to the conversion as well as to regulate the conversion mechanism, poin V.1.1 of IDX Rule No. 1-A stipulates that the conversion price must not be lower than the average 25 days of the share price in the stock market before the EGM is conducted.
On the conversion price, we also need to note whats the Corporate Law has to say about it. Article 33 of the prevailing rule says that the share issuance for the paid-in capital of a company must be paid in full amount. With such requirement that the share issuance must be paid in full, then it requires both parties to make sure that the conversion is done at least equal to the nominal value of the share as stated in the company's article of association. From here, we can conclude that the conversion price must be either the average share price of 25 days prior to the EGM or the nominal value of the share whichever is higher. If it happens that the average 25 day share price is lower than the nominal value of the share, then we should use the nominal value.
thats all for now, folks! be back with another topic which is the shareholders' approval for this corporate action.
Cheers
SS
Now in this session, I am going to cover the determinant for the conversion price.
One thing to also note in the debt to equity conversion when performing this capital increase without pre-emptive rights is to consider how much debt that can be converted into share and by how many shares. The debtor has the interest of making sure his money worth as many shares as possible while the creditor prefers to part way with as little shares as possible. The good news is, there is a mechanism to address this.
The other thing to consider is the share price of the company. In any typical scenario, normally the share price of this kind of company is pretty low and as one can imagine, the lower the share price of such public company, the more shares the creditor have to forgo its shares to the party it owes to in order to pay down the debt. This in turn will result in higher dilution effect to the other existing shareholders.
Due to this dilution effect and in order to mitigate minority shareholders being unnecessarily worse off due to the conversion as well as to regulate the conversion mechanism, poin V.1.1 of IDX Rule No. 1-A stipulates that the conversion price must not be lower than the average 25 days of the share price in the stock market before the EGM is conducted.
On the conversion price, we also need to note whats the Corporate Law has to say about it. Article 33 of the prevailing rule says that the share issuance for the paid-in capital of a company must be paid in full amount. With such requirement that the share issuance must be paid in full, then it requires both parties to make sure that the conversion is done at least equal to the nominal value of the share as stated in the company's article of association. From here, we can conclude that the conversion price must be either the average share price of 25 days prior to the EGM or the nominal value of the share whichever is higher. If it happens that the average 25 day share price is lower than the nominal value of the share, then we should use the nominal value.
thats all for now, folks! be back with another topic which is the shareholders' approval for this corporate action.
Cheers
SS
Tuesday 18 October 2011
Ending Greece Crisis
Since we have been discussing about debt to equity conversion as part of Capital Increase Without Pre-emptive Rights, I come to realize that world can end Greece problem using the debt to equity conversion instead of providing aid or some other form of assistance. Greece debt is so huge and it may take forever to repay them all. And by the way, the longer we wait the deeper and wider the problem and it is not going to be good for everyone. Sigh!
Cheers
SS
Cheers
SS
Capital Increase Without Pre-emptive Rights II
Okay, lets continue yesterday's discussion on Capital Increase Without Pre-emptive Rights. Yesterday we stopped at the criteria of debt that can be converted into equity and in order to fulfill the requirement of the type of debt that can be swapped into equity, we need to see the debt from its Collectible Rights to the payee. Based on para 2 Article 35 of the existing Corporate Law No. 40 year 2007, a debt is considered to have Collectible Rights and therefore can be compensated or converted into equity if such debt arise due to:
1. The Company has received funds in consideration for the tangible or intangible goods/services provided;
2. A guatantor of such debt has paid down all of the Company's debt; or
3. The Company acts as the guarantor for some third party and the Company has recieved some benefit either monetary benefit or in kind benefit that can be valued in monetary terms.
Based on the above, so basically debt that can be converted into shares or capital injection are those debts which benefit have been enjoyed by the Company. In the explanation of such article, it was mentioned that interest or coupon or penalty arising from the debt are not part of the definition of debt although such interest, coupon or penalty may be already overdue. This is because the Company did not enjoy anything out of the interest or coupon or penalty. In essence, the debt portion that can be converted into share capital is only the principal amount only.
Okay... now lets continue tomorrow for more detailed discussion on this debt to equity conversion. again, if you find this writing is useful, please encourage me to continue to write. Or if it is not, I would like to hear from you as well....
Cheers,
Spidey Sail
1. The Company has received funds in consideration for the tangible or intangible goods/services provided;
2. A guatantor of such debt has paid down all of the Company's debt; or
3. The Company acts as the guarantor for some third party and the Company has recieved some benefit either monetary benefit or in kind benefit that can be valued in monetary terms.
Based on the above, so basically debt that can be converted into shares or capital injection are those debts which benefit have been enjoyed by the Company. In the explanation of such article, it was mentioned that interest or coupon or penalty arising from the debt are not part of the definition of debt although such interest, coupon or penalty may be already overdue. This is because the Company did not enjoy anything out of the interest or coupon or penalty. In essence, the debt portion that can be converted into share capital is only the principal amount only.
Okay... now lets continue tomorrow for more detailed discussion on this debt to equity conversion. again, if you find this writing is useful, please encourage me to continue to write. Or if it is not, I would like to hear from you as well....
Cheers,
Spidey Sail
Capital Increase Without Pre-Emptive Rights
As you can see, I have mixed up chemical tanker news and the corporate finance news recently. Basically shipping is capital intensive and therefore the capability to raise financing is really critical for certain shipping company and therefore the role of raising funds is paramount for the success of the organisation. So from now and then please dont be surprised of this mix news. Please tell me if you want me to stop from writing about financing news.
So this time, I am going to discuss about Capital Addition or Increase without Pre-emptive Rights.
In general, issuance of securities to a particular party from Indonesian point of view must all be offered to the existing shareholders first (Rule IX.D.1). So the existing shareholders have the first option to subscribe to such securities. Offering such securities to all shareholders require a tedious process and normally will require shareholders approval among other things.
Do we have exemption on such requirement, some corporates ask?
The good news is yes we do. The bad news is there is only a limited option companies can do it. Based on the existing Corporate Law, exemption applies to such offering but limited only on the following circumstances i.e.
1. If the issuance of securities is in relation to a debt to equity conversion (in cases where a company cannot pay its obligors).
2. If the issuance of securities is in relation to an ESOP or MSOP
3. If the issuance of securities is in relation to or part of a restructuring process
The process of offering securities without first offering to the existing shareholders is called a PMTHMETD process (what a complicated abbreviation, huh!) basically that means a process of issuance of securities for capital increase or addition without pre-emptive rights). However the amount of shares issued is capped at 10% and must be exercised within 2 years after its announcement based on the existing regulation (Rule IX.D.4). Such plan must also be published to the market as required by the capital market authority so corporates must have known the use of proceeds of such understaking prior to doing the transaction.
Having regard to several corporate cases on the debt to equity conversion such Lippo Karawaci, Argo Pantes, Kedaung Setia, Teijin Indonesia Fiber, Surabaya Agung, Suparma, etc lets focus more on the debt to equity conversion as it seems more frequently performed by domesstic corporates than any other exemptions above.
One thing to note on debt to equity conversion is the criteria who can actually do this. First thing to check is as to whether such conversion is already stated and permitted under the ariticle of association of the company. If no such provision provided, then there is no way a company can do so. If the article of association allows for capital addition under a certain restructuring process to improve the company's financial position, then the company can use this basis for the conversion.
The criteria of companies eligible to apply for the debt to equity conversion is as follows:
1. It borrows from the Central bank or other government linked financial institutions and such borrowing is 100% more than its current share capital (basically this clause is pertained to domestic banks that are under restructuring process which happenned a lot during the Asian Financial Crisis)
2. Companies other than banks which have negative working capital AND with total liability 80% more than its assets value at the time the EGM is conducted (this is kind of difficult to fulfill because even if a company is declared bankrupt, it may have assets more than its liability. Probably because of this condition, there is the 3rd item below which helps companies which are really in need of debt reduction and equity infusion to continue operating.)
3. Companies that fails to fulfill its debt obligation and the debt is from a third party (non affiliated party) and such third party agree to that debt to equity conversion.
Basically the third point above doesnt require the company to provide certain financial reviews and ratios from any third party to fulfill the requirement for such debt to equity conversion and therefore have been the most widely used criteria by corporates. One thing to note that such debt should not be from any affiliated parties. This is to avoid cases in the past whereby the debt to equity conversion have been used by the existing shareholders to increase its shareholding without the need to offer its securities to the other shareholders and therefore cornering and diluting the the shareholding amount of the existing shareholders.
The other criteria to be noted is the type of debt which is allowed for equity conversion. As you can see, not all type of debt can be converted. We need to refer to the existing corporate law on the meaning of Rights to Collect (Hak Tagih).
If you would like to continue to hear about this blog, please give comments or give me high five or at least say Hi...
Cheers
PC
So this time, I am going to discuss about Capital Addition or Increase without Pre-emptive Rights.
In general, issuance of securities to a particular party from Indonesian point of view must all be offered to the existing shareholders first (Rule IX.D.1). So the existing shareholders have the first option to subscribe to such securities. Offering such securities to all shareholders require a tedious process and normally will require shareholders approval among other things.
Do we have exemption on such requirement, some corporates ask?
The good news is yes we do. The bad news is there is only a limited option companies can do it. Based on the existing Corporate Law, exemption applies to such offering but limited only on the following circumstances i.e.
1. If the issuance of securities is in relation to a debt to equity conversion (in cases where a company cannot pay its obligors).
2. If the issuance of securities is in relation to an ESOP or MSOP
3. If the issuance of securities is in relation to or part of a restructuring process
The process of offering securities without first offering to the existing shareholders is called a PMTHMETD process (what a complicated abbreviation, huh!) basically that means a process of issuance of securities for capital increase or addition without pre-emptive rights). However the amount of shares issued is capped at 10% and must be exercised within 2 years after its announcement based on the existing regulation (Rule IX.D.4). Such plan must also be published to the market as required by the capital market authority so corporates must have known the use of proceeds of such understaking prior to doing the transaction.
Having regard to several corporate cases on the debt to equity conversion such Lippo Karawaci, Argo Pantes, Kedaung Setia, Teijin Indonesia Fiber, Surabaya Agung, Suparma, etc lets focus more on the debt to equity conversion as it seems more frequently performed by domesstic corporates than any other exemptions above.
One thing to note on debt to equity conversion is the criteria who can actually do this. First thing to check is as to whether such conversion is already stated and permitted under the ariticle of association of the company. If no such provision provided, then there is no way a company can do so. If the article of association allows for capital addition under a certain restructuring process to improve the company's financial position, then the company can use this basis for the conversion.
The criteria of companies eligible to apply for the debt to equity conversion is as follows:
1. It borrows from the Central bank or other government linked financial institutions and such borrowing is 100% more than its current share capital (basically this clause is pertained to domestic banks that are under restructuring process which happenned a lot during the Asian Financial Crisis)
2. Companies other than banks which have negative working capital AND with total liability 80% more than its assets value at the time the EGM is conducted (this is kind of difficult to fulfill because even if a company is declared bankrupt, it may have assets more than its liability. Probably because of this condition, there is the 3rd item below which helps companies which are really in need of debt reduction and equity infusion to continue operating.)
3. Companies that fails to fulfill its debt obligation and the debt is from a third party (non affiliated party) and such third party agree to that debt to equity conversion.
Basically the third point above doesnt require the company to provide certain financial reviews and ratios from any third party to fulfill the requirement for such debt to equity conversion and therefore have been the most widely used criteria by corporates. One thing to note that such debt should not be from any affiliated parties. This is to avoid cases in the past whereby the debt to equity conversion have been used by the existing shareholders to increase its shareholding without the need to offer its securities to the other shareholders and therefore cornering and diluting the the shareholding amount of the existing shareholders.
The other criteria to be noted is the type of debt which is allowed for equity conversion. As you can see, not all type of debt can be converted. We need to refer to the existing corporate law on the meaning of Rights to Collect (Hak Tagih).
If you would like to continue to hear about this blog, please give comments or give me high five or at least say Hi...
Cheers
PC
Quasi Reorganisation
Quasi Reorganisation requirements from Indonesian regulator point of view:
1. Coys must have suffered from negative retained earnings for 3 consecutive years in material amount
2. Have good liquidity and business prospects
3. Deficit must be totally zero - not just reducing the deficit
4. Should not resulted in positive retained earning.
5. Tax implication after the quasi organization and whether needs approval from DGT
6. Depreciation Effect
6. The asset revaluation still needs to be conducted if the revaluation results in lower asset value
7. Priority for accounts to be netted off -
a. General Reserve, b. Specific Reserve, c. Revaluation Reserve d. Effect of Translation e. reducing the nominal share price to reduce Share Capital (if all of these not fully netted off - then no quasi reorganisation)
From PSAK no. 51
1. Coys must have suffered from negative retained earnings for 3 consecutive years in material amount
2. Have good liquidity and business prospects
3. Deficit must be totally zero - not just reducing the deficit
4. Should not resulted in positive retained earning.
5. Tax implication after the quasi organization and whether needs approval from DGT
6. Depreciation Effect
6. The asset revaluation still needs to be conducted if the revaluation results in lower asset value
7. Priority for accounts to be netted off -
a. General Reserve, b. Specific Reserve, c. Revaluation Reserve d. Effect of Translation e. reducing the nominal share price to reduce Share Capital (if all of these not fully netted off - then no quasi reorganisation)
From PSAK no. 51
Monday 17 October 2011
Market Development
Glad to hear that there is an encouraging sign of improvement in the chemical tanker market. For the last couple of weeks market continue to hold up where rates continue to see an improvement. Lets see how it goes in the coming week. Fingers crossed!
Thursday 6 October 2011
Shipping Industry Faces Crisis of Confidence as Fears Mount of Huge Losses and Weak Demand
CONFIDENCE in the shipping industry has fallen to its lowest level in three and a half years because of overcapacity, declining freight rates, rising bunker costs and increasing uncertainty in global economy.
According to a latest Shipping Confidence Survey report from international accountant and shipping adviser Moore Stephens, the average confidence level in August responded by key market players in the shipping industry worldwide was 5.3, on a scale of 1 (low) to 10 (high), compared to 5.6 in the previous survey inMay.
This is the lowest figure recorded since the survey began in May 2008 with a confidence rating of 6.8 - the highest so far.
Richard Greiner, a shipper partner of Moore Stephens, said it was a disappointment to see a decline in shipping confidence. "Confidence remained surprisingly high last year, but it started to slip in 2011. Indeed inmany ways, it is back to the levels of two years ago."
Also, the report stated that confidence level among shipowners from June to August fell from 5.8 to 5.1, the lowest owner rating recorded during the life of the survey. Confidence levels among charterers were even lower at 5.0. And confidence on the part of ship managers dropped from 5.8 to 5.6, while brokers remained comparatively low rating of 5.1.
One respondent was quoted as saying: "Until recently, things looked quite optimistic, but recent doubts over US loan credibility and EU financial worries have severely dented confidence."
Other respondents said it is the most unpredictable period now since the outbreak of the global financial crisis in 2008 and suggested that the market was "back to levels last seen in 2001". And a more lamenting viewpoint is that few could see a short-term solution to the difficulties.
Besides gloomy an economic outlook, overcapacity is another concern. "Markets are at rock-bottom," said one respondent, adding that the current over-tonnage problem will continue to exist for some time "because of the large number of new vessels due to come into service. Older vessels and speculative investors, as well as low-grade operators, will have to disappear before the situation can start to improve."
A respondent was cited as saying: "The situation looks pretty grim, given the massive amount of over-ordering."
According to a latest Shipping Confidence Survey report from international accountant and shipping adviser Moore Stephens, the average confidence level in August responded by key market players in the shipping industry worldwide was 5.3, on a scale of 1 (low) to 10 (high), compared to 5.6 in the previous survey inMay.
This is the lowest figure recorded since the survey began in May 2008 with a confidence rating of 6.8 - the highest so far.
Richard Greiner, a shipper partner of Moore Stephens, said it was a disappointment to see a decline in shipping confidence. "Confidence remained surprisingly high last year, but it started to slip in 2011. Indeed inmany ways, it is back to the levels of two years ago."
Also, the report stated that confidence level among shipowners from June to August fell from 5.8 to 5.1, the lowest owner rating recorded during the life of the survey. Confidence levels among charterers were even lower at 5.0. And confidence on the part of ship managers dropped from 5.8 to 5.6, while brokers remained comparatively low rating of 5.1.
One respondent was quoted as saying: "Until recently, things looked quite optimistic, but recent doubts over US loan credibility and EU financial worries have severely dented confidence."
Other respondents said it is the most unpredictable period now since the outbreak of the global financial crisis in 2008 and suggested that the market was "back to levels last seen in 2001". And a more lamenting viewpoint is that few could see a short-term solution to the difficulties.
Besides gloomy an economic outlook, overcapacity is another concern. "Markets are at rock-bottom," said one respondent, adding that the current over-tonnage problem will continue to exist for some time "because of the large number of new vessels due to come into service. Older vessels and speculative investors, as well as low-grade operators, will have to disappear before the situation can start to improve."
A respondent was cited as saying: "The situation looks pretty grim, given the massive amount of over-ordering."
Subscribe to:
Posts (Atom)
Posts
