Truong Thanh to sell shares below face value
Date: 6/25/2012 7:36:16 AM
The board of Truong Thanh Furniture Corporation (TTF) has decided to sell shares for VND5,000 each, just half the face value. Chairman Vo Truong Thanh had a talk about the forthcoming share issue.
Why has the board decided to issue shares whose price is only half the face value?
- Vo Truong Thanh: Our company is in negotiations over the sale of shares totaling VND75 billion and bonds worth VND75 billion with a South Korean strategic shareholder which is also active in the same sector. The issuance is part of our plan to increase equity and reducing our reliance on bank loans. The sale of shares that costs VND5,000 each is a backup solution. If our negotiations fail at the last minute, we will raise funds from existing shareholders.
The corporation also has a share surplus of VND200 billion to cover the face value differential. However, this is just a decision by the board. We will hold an extraordinary general meeting early next month to discuss this matter. If the proposed issuance is endorsed, we will then write to the State Securities Commission asking for approval. Normally, it will take around one month to get a share issuance license from the stock market regulator.
Why are the shares sold for only VND5,000 each?
- This is an attractive price given the current tough market conditions. If the price is higher, it will be hard to attract buyers. Whether to buy or not depends on existing shareholders. But shareholders can transfer their rights to others. Therefore, whether the price is VND5,000 or above does not affect benefits of shareholders.
How much will the corporation need in this share sale?
- The corporation plans to mobilize VND90 billion from selling shares to existing shareholders. However, this is only a backup solution, and if the strategic shareholder agrees to buy shares at a higher price, we will not need to call for more capital from existing shareholders.
What’s the goal of the share sale?
The economic woes at home and abroad are here to stay. Therefore, the share sale will help our company improve equity, reduce our dependence on bank loans and bring in more profits as we have had to pay huge amounts for the loan interest. We paid VND234 billion in loan interest last year. This big amount of loan interest cut into the earnings of shareholders. In addition, the corporation’s backlog of material wood is big. While awaiting the wood stockpile to fall, we need a solution to improve cash flows in order not to affect business operations. Currently, we are struggling with the pressure from loan interest payments. All solutions above are oriented towards increasing equity and cutting bank loans.
(Source:The Saigon Times Daily)