United Fiber holders to convert 5% bonds by maturity at slashed rate

By Susanna Moon

Chicago, Jan. 23 - United Fiber System Ltd. said it lowered the conversion price on its $10 million 5% convertible bonds due March 30, 2012 in a settlement with bondholders.

Under the agreement, bondholders may convert the bonds at the reduced price of S$0.05 and the company will issue up to 66,887,648 new shares to offset the $2,629,645 interest payable to bondholders, assuming the bonds are converted on March 30.

The conversion price was reduced to S$0.05 from S$0.20, representing a premium of about 76.68% to the volume-weighted average price of S$0.0283 of the company's shares for the full market day on Jan. 19, according to a company press release.

The company said it signed a settlement letter Sunday with ASM Asia Recovery (Master) Fund, ASM Co-Investment Term Trust I and ASM Hudson River Fund.

The bondholders wrote to the company requesting settlement of the bonds and the interest payable by the new maturity date. They said they do not intend to extend the new maturity date.

The company said it would have to redeem the bonds by the March 30 maturity date if the bondholders do not convert the bonds by maturity, but that it was unable to redeem the bonds "due to the current poor market sentiments as well as internal financial constraints."

In extensive negotiations, the bondholders agreed to convert the bonds if the conversion price was reduced to S$0.05.

By issuing the bondholders shares, the company said it will avoid having to incur any cash outflow in order to settle the interest payable on the bonds.

The proposed settlement requires approval by the company's shareholders.

The company extended the maturity of the bonds on Sept. 28 by about six months from Sept. 21.

United Fiber is a Singapore-based investment holding company. Its core businesses are in forestry and pulp production.

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