Nation Lanka to infuse Rs. 700 mn. fresh capital through deal with foreign party

Private placement with Luxembourg incorporated company

Nation Lanka Finance PLC, previously a member of the Ceylinco group under new management since 2011, is seeking to infuse Rs.700 million fresh capital into the company through a private share placement with a Luxembourg company, shareholders have been told.

The company has said in a circular that the new management has redeemed more than 95% of debt instruments of approximately Rs.1 4 billion owed to creditors under the previous Ceylinco regime.

"Nation Lanka is one of the very few companies from the previous Ceylinco regime to settle such liabilities," the circular said. "The company has also been able to record a consolidated net profit of Rs.38 million for the nine months ending December 31, 2013 after an absence of over five years."

The Luxembourg company, GEM Global Yield Fund LLC SCS has been described as "strategic investor" incorporated under the laws of Luxembourg.

The circular says that the total consideration of Rs.700 million will be infused to Nation Lanka in several tranches over a maximum period of 30 months from the date of signing the agreement with the investor on February 4, 2014.

The price per share and the number of shares to be issued for the consideration of Rs.700 million would be determined by a formula agreed upon by the company and investor who will also get up to a maximum of 67.5 million warrants at an exercise price of Rs.9.99 per warrant aggregated to the value of Rs.674.325 million.

The warrants are convertible to ordinary shares within four years of the date of signing the agreement (Feb. 4, 2014).

Nation Lanka has told its shareholders that the placement formula takes into consideration average volumes and price of the company’s shares traded on the CSE.

For each tranche, the company will issue a "placement notice" to the investor stating the amount of shares offered (placement amount) and the price per share (placement price) for that particular tranche of funds.

The circular has given an example of how the formula works taking a hypothetical placement notice issued on Feb. 5, 2014.

This explains that –

- 15 Trading days immediately preceding the date of the relevant placement notice is from 10th January 2014 to 03rd February 2014,

- The actual arithmetical average of Daily Trading Volume during the hese 15 trading days is approximately 1.4 million shares,

- Placement amount (offered quantity in each tranche) is 14 million shares (10 times of the arithmetical average of the daily trading volume during the 15 trading days immediately preceding the date of the relevant placement notice),

- Minimum quantity the investor would subscribe is 7 million shares (50%) with the option to elect to subscribe for 28 million shares (200%) at the investor’s discretion,

- The actual weighted average closing price during the 15 trading days immediately preceding the date of the relevant placement notice is Rs.8.85/- per share,

- Nation Lanka would set the placement price at Rs.9/-0 per share,

- The investor subscribes at Rs.8.10/- per share (90% of the placement price),

- Accordingly, under tranche 01 and this example, the investor would send Nation Lanka a minimum of LKR 56.7 million with the option to go up to LKR 226.8 million.

An extraordinary general meeting of the company has been summoned on March 25, to obtain shareholder approval for the private placement of shares and the issue of unlisted private warrants.

Nation Lanka’s Board of Directors comprises: Messrs. Jayantha Dharmadasa, Asanga Seneviratne, J. Rudra, Harshith Dharmadasa, R. Ramanan, Kirthie Karunaratne and Sunil Kandegedara.
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