Mascotte seeks bond deal as it struggles to reduce debt pile

Taiwanese polysilicon manufacturer Mascotte on Monday waited until after trading hours in Hong Kong before announcing its latest attempt to deal with its debt pile.

With a proposed HK$99.7 million (US$12.9 million) shares issue – launched four days ago – the latest of five debt-driven fundraising exercises initiated by Mascotte since December, the company is attempting to renegotiate the terms of HK$885 million worth of bonds due to mature on January 4.

Citing the need to service net liabilities of HK$236 million, including net current liabilities of HK$220 million, a bank balance of just HK$53 million and a loss from the year ending March 31 of HK$3 billion, Mascotte’s board has negotiated an agreement with bondholders to reduce the interest payable on the January 4 bonds in return for changing them into convertible bonds that would amount to 44.62% of the company in the event of full conversion.

The deal proposed by Mascotte, which also removes the company’s liability to redeem the bonds for cash, would see the convertible bonds mature on December 31, 2014 and pay 7.5% interest per annum. Under the current terms of issue, Mascotte can extend the maturity date until January 4, 2019 but would then have to pay an eye watering interest rate of 12.5% per annum after January 4, 2014.

Although a change to the terms of the bond has been agreed with the bondholders, Mascotte will still have to get the deal through a shareholder vote by February 11 and with public shareholders set to see their holding in the company diluted from 84.44% to just 46.76%, in the event of conversion of the bonds, that is unlikely to prove a straightforward exercise.

Principal shareholder Andrew Liu would see his shareholding diluted from 15.56% to 8.62% in such an eventuality.

The latest fundraising negotiation follows an abandoned HK$27.62 million share placing on Christmas Eve 2012 – replaced by the placing of an aggregate of up to HK$100 million in placing notes, which raised just HK$28.5 million four days later; further share placings on February 4 and 22 raised HK$494.62 million and HK$29.44 million, respectively, in addition to the latest cash call four days ago.