Orient Finance goes for Rs. 546.7 m private placement to do away with preference shares

Orient Finance Plc has announced plans to go for a Rs. 546.7 million private placement, majority of which will be to the holders of preference shares of the company.

The Orient Finance Board has resolved to convert the existing four million preference shares to redeemable, convertible, cumulative, non-voting, unsecured, subordinated shares with a preference on dividend and capital repayment in the event of liquidation. It also resolved to issue up to a maximum of 27.909 million ordinary shares to the preference shareholders by way of a private placement at Rs. 19.59 each. Of the private placement, 24 million shares will be issued to the existing preference shareholders at a proportion of six ordinary shares to everyone preference shares held.

The remaining 3.9 million shares of the private placement will be issued to the existing preference shareholders in lieu of the accrued dividends, due to the preference shareholders as at 31 October 2018, accrued during the period 1 April 2017 to 31 October 2018, amounting to Rs. 76.5 million.

The current stated capital of Orient Finance is Rs. 1.378 billion consisting of approximately 148 million ordinary shares and approximately four million preference shares. 

In February 2017, the company issued 4,000,496 new five-year, unlisted, redeemable, non-convertible, cumulative, non-voting, unsecured, subordinated preference shares to the existing holders of the company in the proportion of one new preference share for every existing 37 ordinary shares held at a price of Rs. 100 per share with a 14% annual dividend per share.

The conversion of preference shares and the issue of ordinary shares by way of a private placement is proposed to meet the Tier 2 capital requirements stipulated by the Central Bank for finance companies. Subsequent to the issue of shares by private placement, the stated capital will be Rs. 1.925 billion consisting of ordinary shares whilst there will no preference shares. 

The Central Bank has approved the move whilst it is subject to approval by the Colombo Stock Exchange and ordinary shareholders and preference shareholders at a General Meeting.