Kuala Lumpur, 24 July 1998
The present economic difficulties have badly hit companies listed on Kuala Lumpur Stock Exchange (KLSE). Volatile foreign exchange movements have greatly increased the cost of doing business for many companies, and have also made it difficult for them to project their financial performance for future years. In addition, the plunge in share prices across the board and the tight liquidity in the banking sector have adversely affected the respective companies' ability to raise funds.
Under Chapter 22 of the present Issues Guidelines, where the issue of warrants or other convertibles is made by way of rights to shareholders, the number of new shares arising from the exercise/conversion of the warrants/convertible securities for which listing is applied shall be limited to 50% of the company's enlarged paid-up capital before exercise/conversion.
In cases where the issue of warrants or other convertibles is not made by way of rights to shareholders, the number of new shares arising from the exercise/conversion of the warrants/convertible securities for which listing is applied and all such issues made within the preceding twelve (12) months shall be limited to 10% of the company's existing paid-up capital before exercise/conversion.
The variations are as follows:-
(i) Issuance of Convertible Securities
The limit on the issuance of convertible securities, either by way of rights or otherwise, is now removed. The existing requirements pertaining to conversion price, shareholders' voting rights as well as utilisation of proceeds would continue to apply.
The Commission would like to clarify that dealings in convertible securities and warrants will be subjected to the requirements of Chapter 5 of the Issues Guidelines which cover dealings in securities. All parties, including substantial shareholders of the issuer, are reminded to adhere to the existing laws and rules on securities dealings and disclosure.
Directors and major shareholders subscribing for the convertible securities to be issued should not dispose of the underlying ordinary shares prior to the listing of the convertible securities.
(ii) Issuance of Warrants
The SC wishes to state that, from now on, the attachment of warrants with rights shares, as provided for under clause 22.02(i) of Chapter 22 of the Issues Guidelines, will be allowed.
However, the pricing of the rights shares should be fixed such that the issuer derives maximum benefit from the capital-raising proposal.
The issuance of naked warrants shall be allowed only under certain specific circumstances as follows:-
- For purposes of strengthening a company's financial position pursuant to a restructuring exercise; and
- For purposes of restructuring of debts or repayment of bank borrowings in order to save a default situation.
The limit for the issuance of all warrants, either by way of rights or otherwise, aggregated with all outstanding warrants, shall not exceed 50% of the company's issued share capital before exercise.
SECURITIES COMMISSION MALAYSIA