I gotten a reply from Mr Chew Eng Han with regards to the lawsuit made by City Harvest Church (CHC) to him. The following is his reply:
[Mrs Light's comment: cut from the msg source file]
The repayment plan
Sent: Friday, 20 December 2013 3:15 PM To: Chc John Lim; CHC Francis Tay Subject: Fw: Payment Plan
Attachments: SOF payment plan.doc
Sent from my BlackBerry 10 smartphone.
Sent: Friday, 20 December, 2013 3:04 PM
Subject: Payment Plan
Proposal For Special Opportunity Fund (SOF) Redemption
AMAC’s role in City Harvest Church’s (CHC) investment:
AMAC Capital Partners Pte Ltd (AMAC), investment manager for CHC since July 2007, has been
advising on the church’s investments in the area of stocks, fixed income bonds and funds, and property acquisitions. From 2007 to date, excluding the outstanding current SOF investment, it has accumulated $11,267,550 in profits. These gains come largely from gains in stock trading, interest paid on past and current SOF investment, and interest on quoted and unquoted bonds. The size of the total portfolio of stocks and fixed income fluctuated around $20 million, and surged to as high as $50 million when Xtron and Firna bonds were purchased.
CHC’s investment – documentary summary 2007 t0 2013
CHC’s Board had taken the approach of accepting a higher risk tolerance in exchange for the
objective of producing higher returns for the surplus building fund, in order to hedge against inflation over the years pending the procurement of the church building premise. This approach is documented in the Investment Committee and Board minutes. The approach had resulted in cumulative investment gains of more than $11 million, which had more than covered any inflation over the relevant years.
CHC started investing in SOF from March 2009 (Tranches 1 to 9). After being presented information that the underlying nature of the investment was in the form of loans which were collateralised by shares in Transcu Group Ltd, a company listed on the Singapore Exchange, and being given details on the value of the collateral relative to the loan amount, the Board approved each tranche and AMAC then acted upon that approval. The SOF was unlike the portfolio of quoted stocks and bonds where AMAC was given full discretion to select the securities without requiring Board approval. Herein is an extract Board minute which documents one of the approval:
21 March 2009 Board minutes 8.2: “The Board has noted that it has approved through email that CHC will invest first $5 million in AMAC’s Special Opportunity Fund.”
The SOF was a fixed return investment which provided yields way above market yields, and went as high as 24% per annum. These initial tranches were all redeemed in Oct 2009 with gains of around $3 million or so. The total investment amount in these tranches approximated $20 million.
Starting from November 2009, the CHC Board again approved a second phase of investing into SOF, which resulted in funds being invested into Tranche 12 ($1.2m), Tranche 13 ($2.92m), Tranche 14 ($3m), Tranche 16 ($3.3m), Tranche 17 ($3m), and Tranche 18 ($9m), in all totalling $22.42m. The tranches were originally to mature in August 2010 but due to market liquidity conditions, AMAC was facing difficulty in liquidating the shares within a short time frame. After meeting the Board and Investment Committee, AMAC wrote on 16 September 2010 to request for a 6-month extension so as to enable orderly liquidation without impairing the share price against the interest of CHC.
Meanwhile, on 28 September 2010, AMAC redeemed Tranche 12 by repaying principal plus interest totalling $1,327,035. On 25 October 2010, AMAC paid $454,972.61 for interest which had accrued on the various tranches.
On 30 October 2010, the Board responded to AMAC that it understood the need for a spaced out orderly liquidation and extended the redemption date to 28 February 2011. However, in the months following, from November 2010 to February 2011, the shares came under selling pressure and lost 50% in value, making it challenging to liquidate the shares in a manner that would enable full recovery of the outstanding loans.
On 10 March 2011, AMAC liquidated some shares to redeem $500,000 of Tranche 17 and to pay $881,194 of interest for the various tranches. On 13 April, AMAC redeemed another $402,740 of Tranche 17. On 27 April, AMAC wrote to request an extension for repayment of Tranches 13, 14, 16 and 18, till 30 August 2011. On 5 May 2011 AMAC paid $990,000 to redeem Tranche 17, and on 13 May 2011, it paid $1,600,346 to redeem the balance of Tranche 17 ($1,107,260), some of Tranche 16 ($285,000) plus interest on the various tranches ($208,086).
Before the Board could respond to AMAC’s request for extension, the shares of Transcu went into voluntary suspension due to working capital crunch. Due to uncertainty as to when the share trading would resume, AMAC wrote to the Board on 17 August 2011 to request for an extension till 30 June 2012. By this time, the remaining SOF investments consisted of Tranche 13 ($2.92m), Tranche 14 ($3m), Tranche 16 ($3.015m) and Tranche 18 ($9m), totalling $17.935m. Tranche 17 had been fully redeemed.
From August 2011 to October 2012, AMAC had been working with the management of Transcu to source for funding so as to enable the shares to resume trading. Two of the CHC Board members (Kong Hee and Tan Ye Peng) recommended a Malaysian contact who supposedly had access to China funds, and AMAC worked on this China party for more than six months. The source turned out to be not genuine and AMAC incurred substantial costs besides losing time. Finally in October 2012, AMAC secured some investors to put up the initial $3m+4m of working capital which was needed before SGX would allow the suspension to be lifted. However, to attract those investors, AMAC had to allow the shares it had been holding to be moved to the investors.
Meanwhile, AMAC was to be allotted 375 million new shares in Transcu after trading resumed, in exchange for selling Forest Pine Group shares to Transcu. SGX however set a moratorium of 6 months on these shares, which AMAC had planned to set aside for CHC’s interest. The Board wrote on 31 October 2012 to acknowledge that it recognized the impact of the moratorium on the redemption process and was agreeable to further extension of time, provided it was given a first charge over the 375 million shares. In April 2013 the shares were formally charged to CHC and subsequently, 106,600,000 shares were sold to raise $1.3m for payment to CHC. The outstanding SOF hence currently stands at $16.6m.
Proposed Redemption of outstanding SOF ($16.6m)
AMAC currently holds 268,400,000 shares which are charged to CHC. At current price of 0.3c, the collateral is worth only $805,200. This is insufficient to meet the outstanding SOF of $16.6m. The only realistic way going forward is through a medium term plan to secure more collateral.
AMAC is working with the major shareholder of Transcu to secure more collateral shares through a restructuring exercise within the company, whereby certain businesses will be injected into Transcu in a share swap deal. This will put more shares in the hands of AMAC which will then be able to liquidate the shares over time to raise cash for payment to CHC. The restructuring exercise is estimated to take place between April and August 2014. Based on this assumed timeline, AMAC would be able to secure and start selling shares from around September 2014. Presumably, if the shares trade with good liquidity, it should take about 16 months to liquidate enough shares to redeem the SOF.
The majority of this payment will come from the restructuring exercise, which AMAC is reasonably confident will succeed and pass through the SGX and EGM approval process. However, it is vital that AMAC controls enough shares to vote in the restructuring plan at the EGM. Hence, AMAC suggests that it will not be in the interest of CHC to sell off all 268,400,000 shares before the EGM.
Based on this line of reasoning, AMAC is proposing to sell off only 50 million shares from now till the EGM date. Additionally, it proposes that shares should be sold only when the share price recovers to 0.7 cents. The proposed projected timeline is as follows:
|Dec 2013-Feb2014||$350,000(50million shares@ 0.7c)|
|Apr2014-Aug2014||Restructuring exercise,s hare swap deal,EGM|
AMAC is committed to do its utmost best to to minimise the loss of the outstanding amount due to CHC. It understands that the church will have to pass the proposal through the Board and the EGM process. In view of this, AMAC requests that details of the SOF investment history and process (as set out in this proposal) be explained to the voting members. This is so as to enable proper understanding of the sequence of events that had led to the current challenging situation, as well as the persistent and unrelenting efforts that AMAC has been and is still making to bring recovery to this investment.
Please append the relevant authorised signature at the bottom in acceptance of this restructuring proposal.
Chew Eng Han, Director AMAC
On behalf of CHC