Singapore’s Courts Asia aims to amend 5¾% notes for new accounting

By Susanna Moon

Chicago, March 7 – Courts Asia Ltd. is soliciting consents until 10 p.m. ET on March 27 to amend the financial covenants of its S$75 million 5¾% series 2 notes due 2019.

The early consent deadline is 5 a.m. ET on March 23. The company has scheduled a noteholders meeting for 10 p.m. ET on March 29.

The amendments are being sought for three new accounting standards that will become mandatorily effective between now and 2019, according to a company announcement.

The accounting standards are FRS 115 revenue from contracts with customers, FRS 109 financial instruments and FRS 116 leases, with FRS 115 and FRS 109 mandatorily effective for the financial year beginning Jan. 1, 2018 and FRS 116 mandatorily effective for the financial year beginning Jan. 1, 2019.

The company said it has early adopted FRS 115 for the financial year ending March 31, 2017, so that it can ascertain the impact on the company’s financials, as well as to avoid a substantial resource crunch involved in adopting two new accounting standards at once.

The adoption of FRS 115 along with the expected adoption of FRS 109 and FRS 116 is expected to have a significant impact on the company’s financial statements, the release noted.

As a result, the company is proposing to amend the financial covenants as follows:

• Consolidated tangible net worth: Decrease the threshold for the minimum consolidated tangible net worth to S$120 million from S$165 million;

• Consolidated net debt to consolidated total equity less than or equal to 1.65x: Exclude additional finance leases that arise as a result of the adoption of FRS 116 from the calculation of consolidated total debt and consequently consolidated net debt, because inclusion of the leases distorts the accuracy of the ratio as an indicator of the company’s real borrowing levels;

• Consolidated secured debt to consolidated total assets less than or equal to 0.65x: Exclude additional finance leases and right-of-use assets as a result of the adoption of FRS 116;

• EBITDA to interest expense greater than or equal to 1.75x, or interest coverage ratio: Reduce the minimum ratio of EBITDA to interest expense to 1.5 times from 1.75 times; and to test the interest coverage ratio for each year-to-date period ending on the last day of each financial year, each financial half-year and if the company is required to prepare quarterly financial statements under the listing rules of the Singapore Exchange; and to amend the timing for filing financial statements and reports to align with the company’s continuing listing obligations.

The early consent fee will be 0.25%, or S$625 per S$250,000 principal amount.

Noteholders who vote in favor of the extraordinary resolution at the meeting or send voting instructions after the early deadline will be ineligible for the early consent fee and will instead receive a normal consent fee of 0.15%, or S$375 per S$250,000 principal amount less any bank charges borne by noteholders.

Holders who are eligible to receive the early consent fee will not receive the normal consent fee.

The quorum required at the meeting will be two or more persons representing a clear majority of the notes. To pass, the measure needs to be voted through by a majority consisting of at least 75% of the votes cast.

The solicitation agent is DBS Bank Ltd. (liabilitymanagement@dbs.com) and the meeting agent is Tricor Singapore Pte. Ltd. (65 6236 3550/3555 or is.corporateactions@sg.tricorglobal.com).

As reported, March 7, 2016, Courts Asia said it priced S$75 million of 5¾% fixed-rate notes due 2019 at par on March 7, 2016. The deal was upsized from an initial target issue size of S$50 million.

Courts Asia is a Singapore-based retailer of household furniture and electronics.

© 2015 Prospect News.
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