LTH exits Silver Bird ahead of scheme

by **Cals** Thu 03 Oct 2013, 10:09

Business & Markets 2013

Written by Fatin Rasyiqah Mustaza of theedgemalaysia.com

Thursday, 03 October 2013 09:58

KUALA LUMPUR: Lembaga Tabung Haji (LTH) has exited troubled bread maker SILVER BIRD GROUP BHD [] ahead of a proposed regularisation scheme that could turn out highly dilutive to the existing major shareholders.

The exit by the pilgrimage fund leaves Tan Sri Vincent Tan’s Berjaya Corp Bhd (BCorp) and Koperasi Pemodalan Felda Malaysia Bhd (KPFM) as the two remaining largest shareholders of Silver Bird at this stage. BCorp holds an 18.13% stake or 73.73 million shares in Silver Bird while KPFM has a 12.7% stake or 51.64 million shares.

A source familiar with the matter said LTH decided to leave Silver Bird because it felt it no longer needed to carry the responsibility of financially supporting the company as interim funding was procured in July.

“Also, the selling down could be because it did not want to commit to the rights issue [in the regularisation scheme],” he said.

The source said LTH had indicated its intention to pare down its stake when the financial irregularities at Silver Bird were first announced in 2012.

The pilgrimage fund reduced its stake in Silver Bird from 21.9% in mid-July to just 5.8% in early September, and ceased to be a substantial shareholder recently. LTH emerged as a substantial shareholder of Silver Bird in 2007.

Pending the finalisation of its regularisation, Silver Bird had in July carried out an interim funding plan that saw two new investors, Sunsci Holdings Sdn Bhd and Covenant Equity Consulting Sdn Bhd, pumping RM16 million into the company to meet urgent capital needs.

The capital injection was by way of Sunsci and Covenant Equity subscribing for the 8% redeemable preference shares (RPS) issued by Ivory Overpower Sdn Bhd, a wholly-owned unit of Silver Bird.

If approved by shareholders, the RPS can be converted into new Silver Bird shares as part of the regularisation exercise. Apart from that, Sunsci and Covenant Equity are seeking shareholders’ approval to acquire about 40% of the enlarged share capital of Silver Bird post-regularisation over the next three years.

The conversion of RPS and the exercise of the 40% share option, if granted to Sunsci and Covenant Equity, would dilute the shareholdings of BCorp and KPFM.

On Tuesday, Silver Bird said if shareholders do not approve the terms under the interim funding exercise, which is to allow Sunsci and Covenant to convert the RPS, the bread maker will have to purchase all the RPS at a cash price of RM2.50 each from investors.

Under the terms, the RPS (including accumulated dividends) shall be exchangeable for the restructured Silver Bird shares together with free warrants on the basis of RM1 of outstanding RPS (plus dividend) for 10 new restructured Silver Bird shares of 10 sen each with 20 detachable warrants.

If the conversion of the RPS is not approved, Sunsci and Covenant Equity would have the option to require Silver Bird to purchase all the RPS within 60 days after investors deliver a notice on the matter.

“This option shall not prejudice any right of the investors to terminate the agreement dated July 22 in relation to the proposed interim funding arising from such non-fulfilment of the said conditions,” said Silver Bird.
Yesterday, Silver Bird closed at 13 sen after a one-year high of 16 sen on Sept 27. The stock was traded lowest at five sen on Jan 3.

This article first appeared in The Edge Financial Daily, on October 03, 2013.