HKC International Holdings Limited (00248) announced that the Board of Directors has recommended a rights issue on the basis of 1 rights share for every 2 consolidated shares held on the record date. The subscription price is set at HK$0.28 per rights share, aiming to raise up to approximately HK$21.8 million (before expenses) by issuing a maximum of 77,833,200 rights shares to eligible shareholders, assuming no change in the total number of issued shares on or before the record date.
The 77,833,200 rights shares to be issued under the terms of the rights issue will represent approximately 50.0% of the total number of issued consolidated shares after the share consolidation takes effect, and approximately 33.3% of the enlarged issued share capital following the allotment and issue of the rights shares.
The rights issue will be conducted on a non-underwritten basis and is open only to eligible shareholders, excluding ineligible shareholders from participation. Assuming the number of issued shares remains unchanged on or before the record date, the 77,833,200 rights shares represent about 50.0% of the issued consolidated shares post-consolidation and about 33.3% of the enlarged issued share capital after the rights issue.
The subscription price of HK$0.28 per rights share must be paid in full upon acceptance of the provisional quota of rights shares by eligible shareholders, after application for additional rights shares, or upon acceptance by a transferee of the nil-paid rights shares. This price represents a discount of approximately 25.5% to the adjusted closing price of HK$0.376 per consolidated share, which is based on the last trading day's closing price of HK$0.047 per existing share on the Stock Exchange, adjusted for the impact of the share consolidation.
The maximum gross proceeds expected to be raised from the rights issue are approximately HK$10.3 million, after offsetting the subscription money for the rights shares provisionally allotted to Mr. Chen Zhongyi against a shareholder's loan of about HK$11.5 million. After deducting related expenses, the maximum net proceeds expected are approximately HK$9.4 million.
The Company intends to use the net proceeds from the rights issue for the following purposes: approximately HK$8.5 million, or 90% of the maximum net proceeds, will be used to repay the Group's bank borrowings; and the remaining balance of about HK$0.9 million, or 10% of the maximum net proceeds, will be used to supplement the Group's general working capital for covering employee costs.
Should the rights issue be undersubscribed, the net proceeds will first be allocated to repaying the Group's outstanding bank borrowings, with any remaining balance used for general working capital purposes.
The Board of Directors has proposed to increase the Company's authorized share capital from HK$20 million (divided into 2 billion existing shares) to HK$40 million (divided into 4 billion existing shares) by creating an additional 2 billion existing shares. The increase in authorized share capital will take effect on the date of the Special General Meeting, subject to approval by an ordinary resolution from shareholders.
The Board has also recommended a share consolidation, under which every 8 issued and unissued existing shares with a par value of HK$0.01 each will be consolidated into 1 consolidated share with a par value of HK$0.08 each. The share consolidation is conditional upon, among other things, shareholder approval via an ordinary resolution at the Special General Meeting and will become effective on the second business day following the meeting.
Following the effective date of the share consolidation, the Company will apply to the Stock Exchange for the listing of and permission to deal in the consolidated shares. As of the date of this announcement, the existing shares are traded on the Stock Exchange in board lots of 4,000 existing shares each.
The Board has proposed that, upon the share consolidation taking effect, the board lot size on the Stock Exchange will be changed from 4,000 existing shares to 10,000 consolidated shares. Based on the closing price of HK$0.047 per existing share (equivalent to a theoretical closing price of HK$0.376 per consolidated share) on the announcement date, the value per board lot of existing shares is HK$188. Assuming the share consolidation becomes effective, the value per board lot of 4,000 consolidated shares would be HK$1,504; and assuming both the share consolidation and the change in board lot size take effect, the estimated value per board lot of 10,000 consolidated shares would be HK$3,760.