HAISAN RESOURCES BERHAD (“HAISAN” OR “COMPANY”) · 2011. 12. 21. · RM44,072,500 comprising 88,145,000 Haisan Shares (inclusive of 7,604,100 Haisan Shares held as treasury

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HAISAN RESOURCES BERHAD (“HAISAN” OR “COMPANY”)

(I) PROPOSED CAPITAL REDUCTION;

(II) PROPOSED M&A AMENDMENTS;

(III) PROPOSED RIGHTS ISSUE;

(IV) PROPOSED DEBT RESTRUCTURING;

(V) PROPOSED PRIVATE PLACEMENT; AND

(VI) PROPOSED EXEMPTION

1. INTRODUCTION

The abbreviations and words used in the ensuring sections of this Announcement shall have the same meanings as defined in the DRA and the announcement dated 12 September 2011 unless the context otherwise requires or defined herewith.

We refer to the announcement dated 12 September 2011 on the Debt Restructuring

Agreement (“DRA”) entered into by Haisan, the Scheme Subsidiaries (as defined

herein) with certain of the secured lenders (“Secured Lenders”) and unsecured lenders

(“Unsecured Lenders”) (collectively referred to as “Scheme Lenders”) for the

restructuring and settlement of debts owing by Haisan and the Scheme Subsidiaries to

the Scheme Lenders.

Following the signing of the DRA, Haisan further sought the assistance of the

Corporate Debt Restructuring Committee to revise certain terms of the proposed debt

restructuring as originally contemplated under the DRA with the Scheme Lenders.

The revisions as set out in Section 2.4 of this Announcement are necessary to enhance

the overall structure of the proposed debt restructuring to include amongst others:

(i) the issuance of new ordinary shares of RM0.05 each to the Unsecured Lenders

to replace certain amount of the irredeemable convertible unsecured loan

stocks agreed to be issued to the Unsecured Lenders and to prepay certain

amount of interest to the Unsecured Lenders in the form of new ordinary

shares;

(ii) the par value of the existing ordinary shares of RM0.50 each be further

reduced from RM0.125 each as originally contemplated in the DRA to

RM0.05 each to eliminate more accumulated losses of Haisan; and

(iii) warrants are attached to the rights shares to improve the subscription rate of

the proposed rights issue.

The necessary approval-in-principle have been obtained from the Scheme Lenders for

the revisions proposed by Haisan. The supplemental agreement to vary certain terms

of the DRA is being drafted and when agreed and signed by all the parties, an

announcement would be made thereafter.

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Pursuant to Paragraph 4.2 of the Practice Note 17 of the Listing Requirements of Bursa Malaysia Securities Berhad (“PN 17”) (“Bursa Securities”), on behalf of the Board of Directors of Haisan (“Board”), Public Investment Bank Berhad (“PIVB”), wishes to announce that the Company proposes to regularise the financial conditions of the Company/Group by undertaking the following proposals:

(i) proposed reduction of Haisan’s issued and paid-up share capital involving the

cancellation of RM0.45 of the par value of each existing ordinary share of RM0.50 each in Haisan pursuant to Section 64 of the Companies Act, 1965 (“Act”) (“Proposed Capital Reduction”);

(ii) proposed amendments to the Memorandum and Articles of Association (“M&A”) of Haisan to facilitate the change in the par value of the ordinary shares from RM0.50 each to RM0.05 each pursuant to the Proposed Capital Reduction (“Proposed M&A Amendments”);

(iii) proposed renounceable rights issue of up to 268,469,666 new ordinary shares

of RM0.05 each in Haisan (“Rights Shares”) together with up to 134,234,833

free detachable warrants (“Warrants”) at an issue price of RM0.05 per Rights

Share on the basis of ten (10) Rights Shares together with five (5) Warrants

for every three (3) ordinary shares of RM0.05 each in Haisan held after the

Proposed Capital Reduction, based on a minimum subscription level of

80,000,000 Rights Shares together with 40,000,000 Warrants (“Minimum

Subscription Level”) on an entitlement date to be determined and announced

later (“Proposed Rights Issue”);

(iv) proposed restructuring of debts owing by the Company and the Scheme Subsidiaries to the Scheme Lenders involving the following : (a) conversion of RM67,234,544 of the debts owing to the Secured

Lenders and the Unsecured Lenders into new term loans with a tenure of eight (8) years;

(b) the issuance of RM9,863,007, 5 years, 4.5%, irredeemable convertible unsecured loan stocks (“ICULS”) at 100% of its nominal value of RM0.01 each together with 56,360,240 Warrants to partially settle the debts due to the Unsecured Lenders;

(c) the issuance of 96,333,400 new Haisan Shares to partially settle the debts and prepay a certain amount of interest to the Unsecured Lenders; and

(d) the remaining amount of debts of RM35,287,991 due to the Unsecured

Lenders will be waived,

(“Proposed Debt Restructuring”);

(v) proposed private placement of up to 133,603,189 new Haisan Shares, representing up to thirty percent (30%) of the issued and paid-up share capital of Haisan then to investors to be identified at an issue price to be determined and announced later (“Proposed Private Placement”); and

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(vi) proposed exemption under Paragraph 16 of Practice Note 9 of the Malaysian Code on Take-Overs and Mergers, 2010 (“Code”) for Able Capital Venture Sdn Bhd (“ACV”), Ong Chin Yet (“OCY”) and the persons acting in concert (“PACs”) with them from having to extend a mandatory take-over offer to acquire the remaining Haisan Shares and convertible securities not already owned by them (“Proposed Exemption”).

(All the above proposals shall hereinafter collectively be referred to as the “Proposed

Regularisation Plan”).

The abbreviation “Haisan Share(s)” or “Share(s)” used throughout this

Announcement refers to the existing ordinary shares of RM0.50 each in Haisan before

the Proposed Capital Reduction or where the context requires, the ordinary shares of

RM0.05 each in Haisan after the Proposed Capital Reduction.

The abbreviation “Haisan Group” or “Group” used throughout this Announcement

refers to the Company and its subsidiaries, collectively.

2. DETAILS OF THE PROPOSED REGULARISATION PLAN

As at 30 November 2011, the issued and paid-up share capital of Haisan is

RM44,072,500 comprising 88,145,000 Haisan Shares (inclusive of 7,604,100 Haisan

Shares held as treasury shares). The Board proposes to cancel all the 7,604,100

Haisan Shares held as treasury shares in accordance to Section 67A of the Act prior to

the implementation of the Proposed Capital Reduction (“Proposed Treasury Shares

Cancellation”). Upon completion of the Proposed Treasury Shares Cancellation, the

issued and paid-up share capital of Haisan will be reduced to RM40,270,450

comprising 80,540,900 Haisan Shares and the credit arising from the cancellation

would be utilised to reduce the accumulated losses of the Company.

As at 30 November 2011, there are 3,827,000 options granted under the employee

share options scheme (“ESOS”) of Haisan which are yet to be exercised

(“Unexercised ESOS Options”). In view of the Proposed Capital Reduction which

would not result in any adjustment to the exercise price of RM0.85 for each option, it

is assumed that none of the Unexercised ESOS Options will be exercised prior to the

implementation of the Proposed Regularisation Plan. In addition, the Company does

not intend to grant any further ESOS options to eligible Directors and employees

under the existing ESOS from the date of this Announcement up to and including the

entitlement date of the Proposed Rights Issue.

2.1 Details of the Proposed Capital Reduction

The Board proposes to reduce the issued and paid-up share capital of Haisan

comprising 80,540,900 ordinary shares of RM0.50 each in Haisan via the

cancellation of RM0.45 of the par value of each ordinary share of RM0.50

each in Haisan pursuant to Section 64 of the Act.

Assuming none of the Unexercised ESOS Options are exercised, the Proposed

Capital Reduction will give rise to a credit amount of approximately RM36.24

million, which will be utilised to set-off the accumulated losses of Haisan.

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For illustrative purposes, the proforma effects of the Proposed Capital Reduction on the accumulated losses of the Company are set out in the following table:

Financial year

ended (“FYE”) 31

December 2010

(Audited)

RM’000

Financial period

ended (FPE) 30

September 2011

(Unaudited)

RM'000

Accumulated losses (14,770) (47,073)

Effects of the Proposed

Treasury Shares Cancellation (587) (587)

Less:

Credit arising from the

Proposed Capital Reduction 36,244 36,244

Resultant reserves after the

Proposed Capital Reduction 20,887 (11,416)

2.2 Details of the Proposed M&A Amendments

The Proposed M&A Amendments entails the amendments to the Memorandum and Articles of Association of Haisan to facilitate the change in the par value of Haisan’s ordinary shares from RM0.50 each to RM0.05 each to accommodate the:

(i) Proposed Capital Reduction; and

(ii) issuance of new Haisan Shares pursuant to the Proposed Rights Issue,

the Proposed Debt Restructuring, the Proposed Private Placement, the exercise of the Warrants and the full conversion of the ICULS.

2.3 Details of the Proposed Rights Issue

2.3.1 Particulars of the Proposed Rights Issue The Proposed Rights Issue entails the issuance of up to 268,469,666

Rights Shares together with up to 134,234,833 Warrants at an issue

price of RM0.05 per Rights Share on the basis of ten (10) Rights

Shares together with five (5) Warrants for every three (3) Haisan

Shares held after the completion of the Proposed Capital Reduction on

an entitlement date to be determined and announced later (“Entitlement

Date”).

The Proposed Rights Issue will be undertaken on the Minimum

Subscription Level comprising 80,000,000 Rights Shares with

40,000,000 Warrants.

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The maximum number of 268,469,666 Rights Shares was arrived at

after taking into account the issued and paid-up share capital of Haisan

after the completion of the Proposed Treasury Shares Cancellation and

the Proposed Capital Reduction. The actual number of the Rights

Shares and Warrants to be issued pursuant to the Proposed Rights Issue

shall be determined on the Entitlement Date, subsequent to the

completion of the Proposed Capital Reduction.

The Rights Shares with Warrants will be provisionally allotted to the

entitled shareholders at the close of business day on the Entitlement

Date. The entitled shareholders can fully or partially subscribe and/or

renounce their entitlements for the Rights Shares together with

Warrants. However, the Rights Shares and the Warrants cannot be

renounced separately. Accordingly, entitled shareholders can only

renounce or subscribe for their entitlements to the Rights Shares and be

entitled to the accompanying Warrants in full or in part in the

proportion of their subscription of the Rights Shares. Nevertheless, the

Warrants will be detached from the Rights Shares immediately upon

issue and will be separately traded.

Any fractional entitlement under the Proposed Rights Issue shall be

disregarded and will be dealt with in such manner as the Board may

deem fit and expedient in the interest of the Company.

The subscription and/or renunciation of the Rights Shares which are

not validly taken up or which are not allotted for any reason

whatsoever will first be made available for excess Rights Share

applications and if remain undersubscribed based on the Minimum

Subscription Level, the Right Shares with the Warrants shall then be

allotted and issue to ACV and OCY in proportion to the Undertakings

provided as detailed in Section 2.3.4 of this Announcement.

The indicative principal terms of the Warrants are set out in Table 1 of

the Appendix of this Announcement.

2.3.2 Basis of determining the issue price of the Rights Shares and the

exercise price of the Warrants and justification for the pricing

The issue price of RM0.05 per Rights Share and the exercise price of

RM0.05 per Warrant were arrived at after taking into consideration of

the following:

(i) par value of Haisan’s ordinary shares of RM0.05 each after the

Proposed Capital Reduction;

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(ii) Haisan’s proforma consolidated net assets (“NA”) per share of

RM0.08 as at 31 December 2010 after taking into consideration

the disposal by IGLO Shanghai (“IGLO SH”) of a piece of

leasehold industrial land in Shanghai, PRC together with a

single storey cold storage warehouse with ancillary facilities,

disposal by IGLO SH of IGLO SH’s assets and the disposal by

IGLO (Shanghai) Logistics of IGLO (Shanghai) Logistics’s

assets that were all completed on 16 September 2011

(“Disposal of SH Assets”) and the Proposed Capital Reduction,

under the Minimum Scenario (as defined herein) as detailed in

Table 4 of the Appendix of this Announcement; and

(iii) five (5)-day volume weighted average market price

(“VWAMP”) of RM0.0686 per Haisan Share up to 6 July 2011, (being the last market day prior to the suspension of the Haisan Shares by Bursa Securities on 7 July 2011).

For illustrative purposes, based on the above 5-day VWAMP of RM0.0686 per Haisan Share, the theoretical ex-rights price is RM0.054 per Haisan Share. Hence, the issue price per Rights Share and the exercise price of the Warrants of RM0.05 respectively, represent a discount of approximately RM0.004 or 7.41% over the theoretical ex-rights price of RM0.054 per Haisan Share.

The Board (save for OCY, Ong Chin Cheong (“OCC”) and Kamarudin Bin Md Derom who are deemed interested in the Proposed Rights Issue) is of the view that on a standalone basis, the discount to the issue price of the Rights Shares and the exercise price of the Warrants will provide all the existing shareholders with an attractive opportunity to subscribe for their entitlements and also to further participate in the equity of Haisan from the exercise of the Warrants.

2.3.3 Ranking of the Rights Shares and new Haisan Shares to be issued

pursuant to the exercise of the Warrants

The Rights Shares shall, upon allotment and issue, rank pari passu in

all respects with the then existing ordinary shares of the Company,

except that they shall not be entitled to any dividends, rights,

allotments and/or other distributions which may be declared, made or

paid prior to the date of allotment of the Rights Shares.

The new Haisan Shares to be issued pursuant to the exercise of the Warrants shall, upon allotment and issue, rank pari passu in all respects with the then existing ordinary shares of the Company, except that they shall not be entitled to any dividends, rights, allotments and/or other distributions which may be declared, made or paid prior to the date of allotment of such new Haisan Shares arising from the exercise of the Warrants.

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2.3.4 Minimum Subscription Level, shareholders’ undertaking and

underwriting arrangement

The Board has determined a minimum subscription level of RM4.00

million to be raised from the Proposed Rights Issue after taking into

consideration the immediate funding requirements of the Haisan

Group, including the Group’s capital expenditure for the expansion of

capacity as well as the incidental expenses arising from the Proposed

Regularisation Plan. The details of the proposed utilisation of gross

proceeds to be raised from the Proposed Rights Issue are disclosed in

Section 2.3.5 of this Announcement.

Based on the issue price of RM0.05 per Rights Share and assuming that the Proposed Rights Issue is undertaken on the Minimum Subscription Level, 80,000,000 Rights Shares with 40,000,000 Warrants will be allotted and issue to ACV and OCY who has each provided irrevocable written undertaking (“Undertakings”) to achieve the Minimum Subscription Level in the manner as set out below:

Existing Shares

held as at 30

November 2011

Rights

Entitlements

Undertakings to

subscribe

Shareholders

No. of

Shares %*

No. of

Shares %

No. of

Shares %^

ACV 36,779,200 45.67 122,597,333 45.67 40,000,000 14.90

OCY 84,596 0.11 281,986 0.11 40,000,000 14.90

Notes: * Excluding 7,604,100 Haisan Shares held as treasury shares as at the 30

November 2011. ^ As a percentage of 268,469,666, being the maximum number of Rights Shares to

be issued pursuant to the Proposed Rights Issue.

In view of the Minimum Subscription Level and the Undertakings, the

Proposed Rights Issue will not be underwritten. Details of the implications of the Code on OCY and ACV arising from

their subscription of the 80,000,000 Rights Shares with 40,000,000

Warrants pursuant to the Undertakings are disclosed in Section 2.6 of

this Announcement.

In the event that the Minimum Subscription Level is not achieved, the Company will not proceed with the implementation of the Proposed Rights Issue. In addition, the Proposed Debt Restructuring and the Proposed Private Placement will also not be implemented as: (i) the Proposed Debt Restructuring is inter-conditional upon the

Proposed Rights Issue; and

(ii) the Proposed Private Placement is conditional upon the Proposed Debt Restructuring and the Proposed Capital Reduction.

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If the Proposed Debt Restructuring is not implemented, the financial conditions of the Group would not be addressed as the Group’s existing borrowings are due and payable. Hence, amongst others, without the Proposed Regularisation Plan being implemented, the securities of the Company would be de-listed from the Official List of Bursa Securities. Therefore, the Proposed Regularisation Plan, taken as a whole is critical and necessary to address the financial conditions of the Group to enable Bursa Securities to consider the upliftment of the Affected Listed Issuer status.

As at the date of this Announcement, the Company does not have any

other alternative plans to address its financial conditions in the event

the Minimum Subscription Level is not achieved.

2.3.5 Proposed utilisation of proceeds

The Proposed Rights Issue is expected to raise gross proceeds of up to approximately RM13.42 million, details of the proposed utilisation are set out below:

Proposed utilisation

Minimum

Scenario^ (RM'000)

Maximum

Scenario* (RM'000)

Expected timeframe for

utilisation of proceeds

Capital expenditure(1)

2,050 7,737 Within 12 months

Estimated expenses for the Proposed Regularisation Plan

(2)


Retirement of bank borrowings(3)

- 3,736 Within 6 months

4,000 13,423

Notes: ^ The scenario assuming that the Proposed Rights Issue would be undertaken

based on the Minimum Subscription Level. * The scenario assuming all the entitled shareholders fully subscribe for their

respective entitlements under the Proposed Rights Issue

(1) Approximately RM2.05 million will be allocated to partially fund the cost of converting an existing vacant warehouse with a built up area of approximately 30,000 square feet into a multiple temperature-controlled facilities (“MTCF”) of approximately RM10.0 million. The MTCF will be located in Port Klang, which is adjacent to the Group’s existing MTCF whereby the Group’s cold storage capacity is expected to increase by 5,000 pallets to 23,000 pallets. The conversion into MTCF is expected to commence in the first quarter of 2012 which will initially be funded from borrowings to be secured and will be expected to be completed by end May 2012.

In accordance with the terms of the DRA, the proceeds in excess of the minimum of RM4.00 million (net of the estimated expenses), 50% of which will be used for capital expenditure in respect of the conversion into MTCF as mentioned in the above and/or the repayment of borrowings utilised to finance the said conversion of warehouse. The estimated costs for the new MTCF with a capacity of 5,000 pallets are as follows:

(RM’000)

Construction 2,750

Refrigeration Equipment 3,400

Polyurethane Panel 2,900

Racking System 650

Material Handling Equipment 300

Total estimated costs 10,000

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(2) The estimated expenses include amongst others, professional fees, fees

payable to relevant authorities and other miscellaneous expenses in relation to the Proposed Regularisation Plan. Any shortfall/surplus in the fund allocated for the estimated expenses will be adjusted accordingly from/to the portion being earmarked for the working capital requirements of the Group. Breakdown of the estimated expenses are as follows:

Type of expense (RM’000)

Professional fees 1,650

Fees payable to the authorities 162

Extraordinary General Meeting (“EGM”) expenses, printing of Circular and Abridged Prospectus, advertisements, etc

100

Miscellaneous expenses 38

Total estimated expenses 1,950 (3) In accordance with the terms of the DRA, the proceeds in excess of the

minimum of RM4.00 million (net of the estimated expenses), 50% of which will be used to accelerate the repayment of the Group’s Secured Term Loan, Unsecured Term Loan A and Unsecured Term Loan B or part thereof on a proportionate basis to all the Scheme Lenders based on their respective liabilities. The Group’s bank borrowings as at the LPD amounts to approximately RM121.57 million and assuming approximately RM3.74 million of the proceeds is used to repay the Group’s borrowings, it is expected to contribute to net interest savings of approximately RM0.26 million per annum based on the average interest rate of 6.85% per annum as at the 30 November 2011.

The proceeds to be received by Haisan pursuant to the exercise of the Warrants are intended to be utilised for the Group’s future expansion and/or working capital requirements including the monthly repayment of the principal and interest of the restructured term loans of approximately RM67.11 million with a tenure of eight (8) years owing by the Company and the Scheme Subsidiaries to the Secured Lenders and Unsecured Lenders pursuant to the DRA (“New Term Loans”).

2.4 Details of the Proposed Debt Restructuring Details of the proposed debt restructuring as contemplated under the DRA and the key revisions to the original terms of the DRA are as follows:

Terms As per the DRA Revisions to the DRA

Nominal

value of

each

ICULS to

be issued

RM0.125 RM0.01

Settlement

to the

Unsecured

Lenders

through the

issuance of

securities

Settlement of RM14,090,010 through the issuance of RM14,090,010 ICULS at RM0.125 nominal value each with 56,360,240 Warrants

Settlement of RM14,679,677 through the issuance of:

(i) (i) RM9,863,007 ICULS at RM0.01 nominal value each with 56,360,240 Warrants; and

(ii) (ii) 96,333,400 new Haisan Shares at

the issue price of RM0.05 each (“Settlement Shares”).

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Terms As per the DRA Revisions to the DRA

Mode of

conversion

of the

ICULS

By tendering one (1) ICULS of

RM0.125 nominal value each for

one (1) new Haisan Share of

RM0.125 par value each

By surrendering for cancellation the

ICULS with an aggregate nominal

value equivalent to the Conversion

Price (as defined herein); or

By surrendering for cancellation

RM0.01 nominal value of ICULS and

paying the difference between the

nominal value of ICULS and the

Conversion Price in cash, for every

one (1) new Haisan Share.

Conversion

of the

ICULS

The conversion shall commence on

the day after the second (2nd

)

anniversary of the issue date:

Anniversary

of Issue Date

Conversion Rate

Per Annum

(%) (RM’000)

2nd

30% 4,227

3rd 30% 4,227

4th 40% 5,636

Total 100% 14,090

The conversion shall commence on

the day after the third (3rd

)

anniversary up to the Maturity Date

(as defined herein)

Put and

Call Option

exercisable

period and

price

The Unsecured Lenders are entitled

to require OCY and OCC to acquire

the ICULS or parts thereof from

them during the put option period at

RM0.125 per ICULS in three

tranches (30%: 30%:40%).

OCY and OCC are entitled to

require the Unsecured Lenders to

sell their ICULS or parts thereof to

OCY and OCC during the call

option period at RM0.135 per

ICULS in three tranches (30%:

30%:40%).

The Unsecured Lenders are entitled

to require OCY to acquire the ICULS

and the Settlement Shares or parts

thereof from them during the put

option period at RM0.05 per

Settlement Share and at RM0.01 per

ICULS in the manner as disclosed in

Section 2.4.3 of this Announcement.

OCY is entitled to require the

Unsecured Lenders to sell their

ICULS or parts thereof to OCY

during the call option period at

RM0.054 per Settlement Share and

RM0.0108 per ICULS in the manner

as disclosed in Section 2.4.3 of this

Announcement.

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2.4.1 Particulars of the Proposed Debt Restructuring

Following from the above-mentioned revisions, the Proposed Debt Restructuring will involve the restructuring and settlement of debts owing by Haisan and the Scheme Subsidiaries to the Secured Lenders and the Unsecured Lenders as at the relevant cut-off dates agreed by the parties of the DRA of RM117,202,212 (“Scheme Indebtedness”), determined as at the relevant cut-off dates agreed with the Scheme Lenders. The Scheme Indebtedness shall be fully settled in the following manner:

(i) RM67,234,544 of the debts due to the Scheme Lenders to be

converted into the New Term Loans; (ii) RM9,863,007 of the debts due to the Unsecured Lenders to be

settled by way of issuance of RM9,863,007 ICULS at the nominal value of RM0.01 each together with 56,360,240 Warrants by the Company;

(iii) RM4,816,670 of the debts due to the Unsecured Lenders to be

settled by way of issuance of 96,333,400 new Haisan Shares at the issue price of RM0.05 per Share (“Settlement Shares”); and

(iv) the remaining debts of RM35,287,991 due to the Unsecured

Lenders will be waived.

The mode of settlement by the Company and the Scheme Subsidiaries of the Scheme Indebtedness due to each of the Scheme Lenders pursuant to the DRA and the Supplemental DRA to be executed are set out in the table below:

Scheme

Lenders

Scheme

Indebtedness

(RM)

Agreed

amount of

Scheme

Indebtedness

to be waived

(RM)

Agreed

amount of

Scheme

Indebtedness

to be settled

(RM)

Restructured/Settled by

New Term

Loans

(RM)

ICULS

(RM)

Settlement

Shares

(RM)

No. of

Warrants

Secured

Lenders

OCBC Bank Berhad

24,159,680 - 24,159,680 24,159,680 - - -

AmBank (M) Berhad

1,019,166 - 1,019,166 1,019,166 - - -

EON Bank Berhad (“EON”)*

1,026,995 - 1,026,995 1,026,995 - - -

Public Bank Berhad

25,618,754 - 25,618,754 25,618,754 - - -

Hong Leong Bank Berhad

1,319,976 - 1,319,976 1,319,976 - - -

Sub-Total 53,144,571 - 53,144,571 53,144,571 - - -

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Scheme

Lenders

Scheme

Indebtedness

(RM)

Agreed

amount of

Scheme

Indebtedness

to be waived

(RM)

Agreed

amount of

Scheme

Indebtedness

to be settled

(RM)

Restructured/Settled by

New Term

Loans

(RM)

ICULS

(RM)

Settlement

Shares

(RM)

No. of

Warrants

Unsecured

Lenders A

CapOne Berhad (“CapOne”)

42,997,327 25,438,504 17,558,823 8,599,465 6,019,629 2,939,729 34,397,920

CIMB Bank Berhad

4,177,734 2,471,669 1,706,065 835,547 584,885 285,633 3,342,240

EON 4,098,126 2,424,570 1,673,556 819,625 573,741 280,190 3,278,560

Sub-Total 51,273,187 30,334,743 20,938,444 10,254,637 7,178,255 3,505,552 41,018,720

Unsecured

Lenders B

EON 7,266,877 2,815,508 4,451,369 2,180,063 1,526,049 745,257 8,720,320

Affin Bank Berhad

981,272 380,180 601,092 294,382 206,073 100,637 1,177,600

Malayan Banking Berhad (“Maybank”)

4,536,305 1,757,560 2,778,745 1,360,891 952,630 465,224 5,443,600

Sub-Total 12,784,454 4,953,248 7,831,206 3,835,336 2,684,752 1,311,118 15,341,520

Total 117,202,212 35,287,991 81,914,221 67,234,544 9,863,007 4,816,670 56,360,240

Notes: * EON Bank Berhad (whose rights in respect of the facilities granted to

Haisan and/or its subsidiaries were vested to Hong Leong Bank Berhad (97141-X) pursuant to the vesting order granted by the High Court of Kuala Lumpur on 17 June 2011).

^ Scheme Subsidiaries comprise of subsidiaries of Haisan that are parties to the DRA, namely, Hai San Ice Industries Sdn Bhd, Pontian Ice Factory Sdn Bhd, Haisan Sdn Bhd, IGLO (M) Sdn Bhd, Hai San & Sons Sdn Bhd, Hai San Holdings Sdn Bhd and IGLO International Limited.

Pursuant to the completion of the Proposed Debt Restructuring, the borrowings of the Group will be substantially reduced and will comprise mainly of the New Term Loans of approximately RM67.23 million. The Group will only need to service interest on the New Term Loans for the first (1

st) three (3) years commencing from 1 August

2011 and thereafter, repayment of principal and interest will commence from the fourth (4

th) year from 1 August 2011.

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Further details of the restructuring and settlement of the Scheme Indebtedness to the Secured Lenders and the Unsecured Lenders are as follows:

(i) Secured Lenders

(a) the total amount of approximately RM53.14 million

owing to the Secured Lenders as at 31 July 2011 shall be converted into an eight (8) years term loan with the respective Secured Lenders. Interest shall be calculated on a monthly basis at base lending rate (“BLR”) plus 0.25% per annum for the entire tenure of the term loan commencing from 31 July 2011 (“Secured Term Loan”);

(b) the Company and/or its relevant subsidiaries shall

service the repayment of the interest on the Secured

Term Loan for the first three (3) years commencing

from 1 August 2011 on a monthly basis; and

(c) the Company and/or its relevant subsidiaries shall repay

the principal on the Secured Term Loan in equal

instalments together with interest commencing from the

fourth (4th

) year from 1 August 2011 on a monthly

basis.

(ii) Unsecured Lenders A

(a) all interest, penalties, costs, fees and other charges or

accruing or incurred after 30 September 2010 up to 31

July 2011 in respect of the amounts of the Unsecured

Debt A owing by the Company to the respective

Unsecured Lenders A shall be waived; and

(b) the Unsecured Lenders A shall grant the Company, an

approximately fifty nine centum (59%) discount or

reduction and/or waiver in the amount owing by the

Company to the Unsecured Lenders A of approximately

RM51.27 million as at 30 September 2010, being the

cut-off date to ascertain the indebtedness (“Cut-Off

Date – Unsecured”) thereby reducing the amounts

owing by the Company to approximately RM20.94

million, which shall be settled in the following manner:

(ba) an amount of approximately RM10.25 million

shall be converted into an eight (8) years term

loan with the respective Unsecured Lenders A.

Interest shall be calculated on a monthly basis at

BLR plus 0.25% per annum for the entire period

of the term loan commencing from 1 August

2011 (“Unsecured Term Loan A”).

- 14 -

(bb) the repayment terms of the Unsecured Term

Loan A are as follows:

(bb)(i) the payment of interest on the Unsecured

Term Loan A for the first three (3) years

commencing from 1 August 2011 on a

monthly basis;

(bb)(ii) the repayment of principal on the

Unsecured Term Loan A in equal

instalments together with interest

commencing from the fourth (4th) year

from 1 August 2011 on a monthly basis;

and

(bc) the remaining amount of approximately

RM10.69 million shall be fully settled by the

Company to the Unsecured Lenders A via the

issuance by the Company of approximately

RM7.18 million nominal value of ICULS

together with 41,018,720 Warrants and RM3.51

million to be settled by way of issuance of

70,111,040 Settlement Shares.

(iii) Unsecured Lenders B

(a) all interest, penalties, costs, fees and other charges or

accruing or incurred after the Cut-off Date – Unsecured

up to 31 July 2011 in respect of the amounts of the

Unsecured Debt B owing by the Scheme Subsidiaries to

the Unsecured Lenders B shall be waived; and

(b) the Unsecured Lenders B shall grant the Scheme

Subsidiaries, an approximately thirty nine (39%)

discount or reduction and/or waiver in the amount

owing by the Scheme Subsidiaries to the Unsecured

Lenders B of approximately RM12.78 million as at the

Cut-Off Date - Unsecured thereby reducing the amount

owing by the Scheme Subsidiaries to approximately

RM7.83 million, which shall be settled in the following

manner:

(ba) an amount of approximately RM3.84 million

shall be converted into an eight (8) years term

loan with the respective Unsecured Lenders B.

Interest shall be calculated on a monthly basis at

BLR plus 0.25% per annum for the entire period

of the term loan commencing from 1 August

2011 (“Unsecured Term Loan B”).

- 15 -

(bb) The repayment terms of the Unsecured Term

Loan B are as follows:

(bb)(i) the payment of interest on the Unsecured

Term Loan B for the first three (3) years

commencing from 1 August 2011 on a

monthly basis;

(bb)(ii) the repayment of principal on the

Unsecured Term Loan B in equal

instalments together with interest on the

Unsecured Term Loan B commencing

from the fourth (4th) year from 1 August

2011 on a monthly basis; and

(bc) the remaining amount of approximately RM3.99

million shall be fully settled by the Company to

the Unsecured Lenders B via the issuance by the

Company of approximately RM2.68 million

nominal value of ICULS together with

15,341,520 Warrants and RM1.31 million to be

settled by way of issuance of 26,222,360

Settlement Shares.

2.4.2 Details of the Proposed Issuance of ICULS with Warrants

and the Proposed Issuance of Settlement Shares

Pursuant to the Proposed Debt Restructuring, the debts owing to the Unsecured Lenders A and the Unsecured Lenders B will be partly settled via the issuance of RM9,863,007 nominal value of ICULS of RM0.01 each together with 56,360,240 Warrants and issuance of 96,333,400 Settlement Shares at the issue price of RM0.05 per Settlement Share.

2.4.2.1 Indicative principal terms of the ICULS

The ICULS will be constituted by a Trust Deed to be executed between the Company and Pacific Trustees Berhad, the Trustee for the benefit of the ICULS holders. The indicative principal terms of the ICULS are set out in Table 2 of the Appendix of this Announcement.

2.4.2.2 Indicative principal terms of the Warrants

The Warrants to be issued pursuant to the Proposed Debt Restructuring shall also form the same series of the Warrants to be issued pursuant to the Proposed Rights Issue and both of these Warrants shall be constituted under the same Deed Poll to be executed by the Company.

- 16 -

The indicative principal terms of Warrants are set out in Table 1 of the Appendix of this Announcement.

2.4.2.3 Basis of determining the conversion price of the

ICULS, exercise price of the Warrants and issue

price of the Settlement Shares

The conversion price of the ICULS and the exercise price of the Warrant for every one (1) new Haisan Share of RM0.05 as well as the issue price of the Settlement Shares of RM0.05 per Settlement Share was arrived at after taking into consideration of following:

(i) par value of the Haisan Shares of RM0.05 each

after the Proposed Capital Reduction; (ii) Haisan’s proforma consolidated NA per share of

RM0.08 as at 31 December 2010 after taking into consideration the disposals of assets in Shanghai and the Proposed Capital Reduction, under the Minimum Scenario as detailed in Table 4 of the Appendix of this Announcement; and

(iii) five (5)-day VWAMP RM0.0686 per Haisan Share up to 6 July 2011 ( being the last market day prior to the suspension of the Haisan Shares by Bursa Securities on 7 July 2011).

For illustration purposes only, the conversion price of

the ICULS, the exercise price of the Warrants and the

issue price of the Settlement Shares of RM0.05

represents a discount of approximately RM0.004 or

7.41% over the theoretical ex-rights price of the Haisan

Shares as detailed in Section 2.3.2 of this

Announcement.

The Board (save for OCY, OCC and Kamarudin Bin

Md Derom who are deemed interested in the Proposed

Debt Restructuring) is of the view that the discount is

reasonable to compensate for a low coupon rate of 4.5%

of the ICULS (as compared to the average interest rate

of the borrowings of 7.82% per annum as at 30

November 2011 prior to the Proposed Debt

Restructuring) and waiver of a portion of the debts

owing by the Company and the Scheme Subsidiaries to

the Unsecured Lenders.

- 17 -

2.4.2.4 Ranking of the Settlement Shares and the new

Haisan Shares to be issued pursuant to the

conversion of the ICULS and the exercise of the

Warrants The Settlement Shares and the new Haisan Shares to be issued pursuant to the conversion of the ICULS and the exercise of the Warrants shall, upon allotment and issue, rank pari passu in all respects with the then existing ordinary shares of the Company, except that they shall not be entitled to any dividends, rights, allotments and/or other distributions which may be declared, made or paid prior to the date of allotment of such new Haisan Shares arising from the issuance of the Settlement Shares and the conversion of the ICULS or the exercise of the Warrants, as the case may be. For the avoidance of doubt, the Settlement Shares shall not be entitled to participate in the Proposed Rights Issue.

2.4.2.5 Proceeds to be raised from the conversion of the

ICULS and the exercise of the Warrants

The quantum of proceeds to be received by Haisan

pursuant to the conversion of the ICULS and the

exercise of the Warrants in the future, the quantum of

which is dependent upon the actual number of ICULS

converted (should conversion be partially in cash) and

the actual number of Warrants exercised are intended to

be utilised for the Group’s future expansion and/or

working capital requirements including the monthly

repayment of the principal and/or interest of the New

Term Loans due to the Scheme Lenders.

2.4.3 Put and Call Option

Pursuant to the terms and conditions of the DRA, the Unsecured Lenders and OCY will enter into Put and Call option agreements with each of the respective Unsecured Lenders whereby OCY grants an option to each of the Unsecured Lenders to sell (“Put Option”) and each of the Unsecured Lenders grant options to OCY to purchase (“Call Option”), as the case may be, the 986,300,700 ICULS and the 96,333,400 Settlement Shares to be issued to the Unsecured Lenders pursuant to the Proposed Debt Restructuring exercisable by either OCY or the Unsecured Lenders in the following manner:

- 18 -

Put Period Maximum exercisable in each Put Option

period

%^

Total Amount

Put# RM’000

Settlement Shares

Amount Put#

RM’000

ICULS Amount

Put# RM’000

Commencing on 30 days before the day preceding the 2

nd anniversary*

30 4,404 4,404 -


rd anniversary*

70 10,276 413 9,863

Total 100 14,680 4,817 9,863 Notes: * Anniversary of the date of issuance of the ICULS. ^ Maximum exercisable amount as a percentage of the maximum exercisable

amount on both the Settlement Shares and the ICULS held by the Unsecured Lenders/OCY in each of the Put Option period.

# The Put Option price is RM0.01 per ICULS and RM0.05 per Settlement Share.

Call Period Maximum exercisable in each Call Option period

%^

Total Amount

Call# RM’000

Settlement Shares

Amount Call#

RM’000

ICULS Amount

Call# RM’000


nd anniversary*

30 4,756 4,756 -


rd anniversary*

70 11,071 446 10,625

Total 100 15,854 5,202 10,652

Notes: * Anniversary of the date of issuance of the ICULS. ^ Maximum exercisable amount as a percentage of the maximum exercisable

amount on both the Settlement Shares and the ICULS held by the Unsecured Lenders /OCY in each of the Call Option period.

# The Call Option price is RM0.0108 per ICULS and RM0.054 per Settlement Share.

If the Call Option or Put Option is not exercised within the respective Call Option/Put Option period as depicted in the above tables, then the rights of either parties for that particular Call Option/Put Option period shall lapse and shall be no longer exercisable. Should such a situation occurs, the Unsecured Lenders holding the ICULS and the Settlement Shares can dispose these securities to other party(ies).

- 19 -

2.4.4 Salient conditions precedent and other salient terms of the DRA The salient conditions precedent to the implementation of the Proposed Debt Restructuring and the other salient terms of the DRA are set out in the announcement dated 12 September 2011. The revised terms supplemental to the DRA will be announced upon the execution by the respective parties.

2.5 Proposed Private Placement

2.5.1 Placement Size

The Proposed Private Placement would entail the issuance of up to

133,603,189 new Haisan Shares, representing up to thirty percent

(30%) of the issued and paid-up share capital of Haisan then to

independent third party investor(s) to be identified at an issue price to

be determined and announced later. The Placement Shares are not

intended to be place out to any of the Directors, major shareholders

and chief executive officer of Haisan and/or persons connected to

them.

Subject to the prevailing market conditions, the Proposed Private

Placement may be implemented in several tranches.

For implementation purposes, the Proposed Private Placement is

expected to be implemented after the Proposed Capital Reduction, the

Proposed Rights Issue and the Proposed Debt Restructuring.

2.5.2 Basis of arriving at the issue price of the Placement Shares

The issue price of the Placement Shares and the price-fixing date shall

be determined and announced by the Board at a later date after

obtaining the approval(s) from the relevant authorities/shareholders for

the Proposed Regularisation Plan.

The issue price for the Placement Shares will be determined after taking into consideration the following: (i) RM0.05, being the par value of the Haisan Shares after the

Proposed Par Value Reduction; or (ii) at a discount of not more than ten percent (10%) to the five (5)-

day VWAMP of the Haisan Shares immediately preceding the price-fixing date,

whichever is higher. For illustration purposes only, the indicative issue price of the Placement Shares of RM0.05 each represents a discount of approximately RM0.004 or 7.41% over the theoretical ex-rights price of the Haisan Shares as detailed in Section 2.3.2 of this Announcement.

- 20 -

2.5.3 Ranking of the Placement Shares

The Placement Shares shall, upon allotment and issue, rank pari passu

in all respects with the then existing Haisan Shares, save and except

that the Placement Shares will not be entitled to any dividends, rights,

allotments and/or other distributions which may be declared, made or

paid prior to the date of allotment of the Placement Shares.

2.5.4 Proposed Utilisation of Proceeds

The exact amount of gross proceeds to be raised from the Proposed Private Placement is dependent on the actual issue price and the actual number of Placement Shares to be placed to the third party investor(s). For illustration purposes, the Company is expected to raise estimated gross proceeds of up to RM6.68 million based on the indicative issue price of RM0.05 per Placement Share, details of the proposed utilisation are set out below:

Proposed utilisation

Minimum

Scenario

RM'000

Maximum

Scenario

RM'000

Expected

timeframe for

utilisation of

proceeds

Capital Expenditure(1)


Working capital(2)

- 4,420 Within 12 months

3,853 6,680

Notes:

(1) Under the Minimum Scenario, approximately RM3.85 million will be

allocated to partially fund the cost of converting an existing vacant

warehouse into a MTCF in addition to approximately RM2.05 million

allocated from the proceeds from the Proposed Rights Issue as disclosed

in Section 2.3.5 of this Announcement.

Under the Maximum Scenario, approximately RM2.26 million will be

allocated to fund the balance of the total cost of converting an existing

vacant warehouse into a MTCF of approximately RM10.0 million in

addition to approximately RM7.38 million allocated from the proceeds

from the Proposed Rights Issue as disclosed in Section 2.3.5 of this

Announcement.

(2) The proceeds of up to approximately RM4.42 million would be utilised

for the Group’s future expansion opportunities and for general working

capital requirements, including operating expenditure such as

employees’ salaries and related statutory costs, purchase of materials,

selling and distribution expenses, the breakdown of which have yet to be

determined.

In the event of a variation in the gross proceeds raised due to the

difference in the issue price and/or number of the Placement Shares to

be placed, the Company will vary the utilisation amount for working

capital purposes accordingly.

- 21 -

2.6 Proposed Exemption

As at 30 November 2011, ACV, OCY and the PACs with them hold an

aggregate of 42,852,502 Haisan Shares representing 53.20% of the equity

interest in Haisan.

The shareholdings of ACV, OCY and the PACs with them could potentially increase based on the following scenario, the details of which are set out in the table below: (i) The Proposed Rights Issue are undertaken based on the Minimum

Scenario whereby, OCY and ACV pursuant to the Undertakings would be the only subscribers of the Proposed Rights Issue;

(ii) None of the other ESOS holders exercise their ESOS Options save for OCY and the PACs with him exercise their unexercised ESOS Options as at 30 November 2011;

(iii) The Unsecured Lenders exercise all the Put Options or OCY exercise

all the Call Options on the respective Put and Call Option Exercise Period and OCY converts all the ICULS purchased on the basis of tendering one (1) ICULS together with cash payment of RM0.04 for one (1) new Haisan Share; and

(iv) ACV and OCY exercise all the Warrants issued to them pursuant to

the Proposed Rights Issue.

THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK

- 22 -

The proforma shareholdings of ACV, OCY and the PACs with them prepared based on the scenarios as described in the above:

Shareholders

Existing Shares

held as at 30

November 2011. After the Proposed

Rights Issue

After the Proposed

Debt Restructuring

and the Proposed

Private Placement

After the full exercise

of ESOS Options by

OCY, OCC and

Kamarudin Bin Md

Derom6

After the exercise

of the Put and Call

Options on the 1st

Tranche Settlement

Shares7

After the exercise

of Put and Call

Option on the 2nd

Tranche

Settlement Shares8

After the

exercise on the Put

and Call Option on

the ICULS and

assuming the full

conversion of the

ICULS9

After full exercise of

the Warrants

No. of

Shares ^% No. of Shares %

No. of

Shares %

No. of

Shares %

No. of

Shares %

No. of

Shares %

No. of

Shares % No. of Shares

%

ACV 36,779,200 45.67 76,779,200 47.83 76,779,200 22.99 76,779,200 22.86 76,779,200 22.86 76,779,200 22.86 76,779,200 5.81 96,779,200 7.10

OCY 84,596 0.11 40,084,596 24.97 40,084,596 12.00 40,884,596 12.17 128,962,656 38.39 137,217,996 40.85 1,123,518,696 84.97 1,143,518,696 83.94

OCC 92,338 0.11 92,338 0.06 92,338 0.03 692,338 0.21 692,338 0.21 692,338 0.21 692,338 0.05 692,338 0.05

Lim Geok Lian1 200 * 200 * 200 * 200 * 200 * 200 * 200 * 200 *

Ong Hee Siang2 200 * 200 * 200 * 200 * 200 * 200 * 200 * 200 *

Ong Geok Moi3 370,000 0.46 370,000 0.23 370,000 0.11 370,000 0.11 370,000 0.11 370,000 0.11 370,000 0.03 370,000 0.03

Ong Kim Mui3 200 * 200 * 200 * 200 * 200 * 200 * 200 * 200 *

Ho Yow Nan4 200 * 200 * 200 * 200 * 200 * 200 * 200 * 200 *

Yeoh Guan

Chai4 200 * 200 * 200 * 200 * 200 * 200 * 200 * 200 *

Kamarudin Bin

Md Derom

5,524,968 6.86 5,524,968 3.44 5,524,968 1.65 6,124,968 1.82 6,124,968 1.82 6,124,968 1.82 6,124,968 0.46 6,124,968 0.45

Kamarolzaman

Bin Md Derum5 200 * 200 * 200 * 200 * 200 * 200 * 200 * 200 *

Kamarul Ariffin

Bin Md Derum5 200 * 200 * 200 * 200 * 200 * 200 * 200 * 200 *

TOTAL 42,852,502 53.21 122,852,502 76.53 122,852,502 36.79 124,852,502 37.17 212,930,562 63.39 221,185,902 65.85 1,207,486,602 91.32 1,247,486,602 91.57

- 23 -

Notes: ^ Excluding 7,604,100 Haisan Shares held as treasury shares as at 30 November 2011. * Less than 0.01%. 1. Lim Geok Lian is the spouse of OCC 2. Ong Hee Siang is the son of OCC 3. Ong Geok Moi and Ong Kim Mui are siblings to OCC and OCY 4. Ho Yow Nan and Yeoh Guan Chai are brother-in-laws to OCY 5. Kamarul Ariffin Bin Md Derum and Kamarolzaman Bin Md Derum are siblings to Kamarudin

Bin Md Derom 6. The ESOS Options held by OCY, OCC and Kamarudin Bin Md Derom of 800,000 Options,

600,000 Options and 600,000 Options, respectively are fully exercised as at 30 November 2011.

7. Upon the exercise of the Put and Call Options on the first tranche of the 88,078,060 Settlement Shares by the Unsecured Lenders and/or OCY within 30 days before the day preceding the second anniversary year of the issuance of the ICULS.

8. Upon the exercise of the Put and Call Options on the second tranche of the 8,255,340 Settlement Shares by the Unsecured Lenders and/or OCY within 30 days before the day preceding the third anniversary year of the issuance of the ICULS

9. Upon the exercise of the Put and Call Options on the 986,300,700 ICULS and assuming full conversion into new Haisan Shares by tendering one (1) ICULS together with cash payments of RM0.04 for one (1) new Haisan Share.

Based on the above table, the shareholdings of ACV and OCY may potentially increase such that they will individually trigger the conditions of Part III of the Code whereby each of them would be obliged to extend a mandatory take-over offer to acquire the remaining Haisan Shares and convertible securities not already held by either of them, the details of which are set out below: (i) Under the Minimum Scenario pursuant to the Proposed Rights Issue

and assuming ACV and the PACs with it exercise all the unexercised ESOS Options as at 30 November 2011, the shareholdings of ACV would potentially increase by more than two percent (2%) in any six (6) months period upon the subscription of the Rights Shares by ACV as illustrated in the above table.

Hence, in compliance with Part III of the Code, ACV and the PACs

with it would be obliged to extend a mandatory take-over offer to acquire the remaining Haisan Shares and convertible securities not already held by ACV or the PACs with it upon completion of the Proposed Rights Issue.

(ii) Pursuant to the terms of the DRA and as disclosed in Section 2.4.3 of

this Announcement, the Unsecured Lenders and OCY are entitled to exercise the Put and Call Options of up to 96,333,400 Settlement Shares and 986,300,700 ICULS.

Upon exercise of the Put and Call Option on the first tranche of the

88,078,060 Settlement Shares by the Unsecured Lenders and/or by OCY within 30 days before the day preceding the second anniversary year of the issuance of the ICULS, the shareholdings of OCY could potentially increase to more than 33% of the enlarged issued and paid-up share capital of Haisan.

Thereafter, OCY’s shareholdings in Haisan could potentially increase

by 2% in any six (6) months period in the following scenarios:

(a) upon the exercise of the Put and Call Option on the second tranche of the 8,255,340 Settlement Shares by the Unsecured Lenders and/or by OCY within 30 days before the day preceding the third anniversary year of the issuance of the ICULS; and

- 24 -

(b) the conversion of the ICULS owned by OCY pursuant to the exercise of the Put and Call Options either by OCY or the Unsecured Lenders.

As it is not the intention of ACV, OCY and the PACs with them to undertake a mandatory take-over offer for the remaining Haisan Shares and convertible securities not already held by them, PIVB shall, on behalf of ACV, OCY and the PACs with them, make an application to Securities Commission Malaysia (“SC”) to seek an exemption under Paragraph 16.1 of Practice Note 9 of the Code from the mandatory take-over offer obligation provided that the Proposed Exemption is approved (in a poll) by the non-interested shareholders of Haisan at a general meeting to be convened. Upon the approval by the non-interested shareholders, the SC would then be able to consider the exemption sought by them. It is pertinent to note that in the event ACV, OCY and the PACs with them do not succeed in obtaining the approval from the non-interested shareholders for the Proposed Exemption, the Proposed Rights Issue will not be implemented as the Proposed Rights Issue is conditional upon the Proposed Exemption. In such event, the Proposed Debt Restructuring and the Proposed Private Placement will also not be implemented due to the conditionality of the Proposed Regularisation Plan as disclosed in Section 6 of this Announcement.

3. RATIONALE FOR THE PROPOSED REGULARISATION PLAN

Haisan was classified as an Affected Listed Issuer pursuant to Paragraph 8.04 of Chapter 8 and Paragraph 2.1(e) of PN 17 on 9 June 2010.

The Group started recording losses in the FYE 2008 up to the FPE 30 September

2011 and the key reasons for the deterioration in its financial performance and

conditions of the Group were as follows:

(i) Unprofitable operations in the Peoples’ Republic of China (“PRC”) and

non-income generating assets in Vietnam. The losses from the PRC operations are mainly due to competition in the Temperature-Controlled Logistics (“TCL”) market in the PRC which has resulted the Group to price its services competitively and coupled with the under-utilisation of capacities to cover the fixed operating costs and finance cost. This is in view that the TCL operations require high capital expenditure which was financed substantially from borrowings secured by the Group. The total investment in the TCL operation in Guangzhou and Shanghai was approximately RM49.51 million as at 30 November 2011 and was substantially financed by borrowings and indirectly from advances provided by the holding company who in turn had utilised banking lines to fund the advances.

- 25 -

In addition, the Group had in 2006, acquired the land use rights of a piece of land in Vietnam for a cash consideration of approximately RM13.28 million, substantially financed via borrowings to expand its TCL business into Vietnam, one of the fastest growing economies in the ASEAN region. However, the Group has placed its TCL expansion plan in Vietnam on hold in view of the high inflation rate in Vietnam and the steep interest rates hikes then.

(ii) High level of borrowing resulting in high finance costs

The nature of the Group’s business requires high capital investment which had

been substantially financed by borrowings. Hence, the Group’s borrowings

has increased from approximately RM133.87 million in the FYE 2006 to a

high of approximately RM190.06 million in the FYE 2008 and then decreased

to approximately RM157.62 million in the FYE 2010 following the sale of

certain assets to pare down the borrowings. In view of the deterioration in

financial performance which resulted in the strained liquidity position of the

Group and several unsuccessful attempts to raise funds to refinance its

borrowings, the Group had first defaulted in the repayment of borrowings in

June 2010.

The Proposed Regularisation Plan is formulated to address the present financial

conditions of the Group. In addition, the Group has formulated some future plans and

business strategies that will be implemented by the Group to improve its revenue and

reduce operating costs for the sustainability of its business in the future.

The rationale for the Group to undertake the Proposed Regularisation Plan are set out

in the ensuing paragraphs.

3.1 Proposed Capital Reduction

The rationale and justification for the Proposed Capital Reduction are as follows:

(i) to allow the Company to substantially reduce its accumulated losses

and to cancel any paid-up share capital which is unrepresented by

available assets of the Company/Group. Consequently, the par value of

the Haisan Shares will be more reflective of the financial position of

the Company which is expected to facilitate the Proposed Rights Issue

and the Proposed Private Placement as well as for any other fund

raising exercise to be undertaken by the Company in the future; and

(ii) the reduction in the accumulated losses from the Company/Group’s

balance sheet would not only enhance the credibility with the bankers,

suppliers, investors and other stakeholders, but it would also provide

the financial platform for the Group’s future growth.

- 26 -

3.2 Proposed M&A Amendments

The Proposed M&A Amendments is intended to facilitate the change in the following: (i) the par value of the Company’s ordinary shares from RM0.50 each to

RM0.05 each as a result of the Proposed Capital Reduction; and

(ii) number of ordinary shares in the authorised share capital as a result of the change in the par value of the Company’s ordinary shares from RM0.50 each to RM0.05 each.

The Proposed M&A Amendments shall in turn facilitate the implementation of the Proposed Capital Reduction, the Proposed Rights Issue, the Proposed Debt Restructuring and the Proposed Private Placement.

3.3 Proposed Rights Issue

The rationale and justification for the Proposed Rights Issue are as follows: (i) to recapitalise the balance sheet of the Company after the Proposed

Capital Reduction;

(ii) to enable the Group to raise funds primarily to part finance the Group’s capital expenditure for the increase in the capacity of its TCL operations, upgrading of its existing facilities and partial repayment of borrowings;

(iii) to provide existing shareholders the opportunity to subscribe for new

Haisan Shares to further participate in the equity of the Company and the prospects and future growth;

(iv) the Warrants to be issued for free pursuant to the Proposed Rights Issue

will provide the existing shareholders with an attractive option to increase their equity participation in Haisan at a predetermined exercise price during the tenure of the Warrants. In addition, proceeds from the exercise of the Warrants, if any, in the future will be utilised for the Group’s future expansion and/or working capital requirements including the monthly repayment of the principal and interest of the New Term Loans due to the Scheme Lenders; and

(v) to minimise the immediate dilution effect on the earning per share

(“EPS”) of the Group arising from the issuance of the Warrants which would otherwise arise from a full equity issue.

- 27 -

3.4 Proposed Debt Restructuring

The rationale and justification for the Proposed Debt Restructuring are as follows: (i) to allow the Group more time to revive and rebuilt its financial position

through the restructuring of indebtedness owing to the Secured Lenders converted into new term loans. The Group only needs to service interest for the first three (3) years and principal and interest repayment will commence in the fourth (4th) anniversary year;

(ii) to reduce the total interest bearing borrowings of the Group by approximately RM40.11 million (representing approximately thirty four per centum (34%) of the Scheme Indebtedness), arising from the following settlement agreement with the Scheme Lenders pursuant to the DRA:

(a) approximately RM35.29 million owing to the Unsecured Lenders will be waived; and (b) the issuance of Settlement Shares amounting to approximately RM4.82 million.

Further, upon full conversion of the ICULS at the Maturity Date (as defined herein), the borrowings of the Group will reduce by approximately RM9.86 million. The reduction in borrowings will accordingly reduce the gearing of the Group;

(iii) more importantly, with the above debts agreed to be restructured by the

Scheme Lenders, the waiver of certain amount of debts and the partial settlement via the issuance of ICULS with Warrants and Settlement Shares, this is expected to reduce the debt servicing burden of the Group. In addition, the Group will be able to preserve its cash flows to meet working capital requirement of the Group as the servicing of the principal portion of the debts restructured into the New Term Loans would be deferred for a three (3) year period;

(iv) savings in interest cost as the coupon rate of 4.5% per annum of the

ICULS is lower than the effective interest rate of all the debts due to

the Unsecured Lenders as at the 30 November 2011. In addition, part

of the Settlement Shares to be issued comprise of interest paid in

advance of RM0.59 million to the Unsecured Lenders, further

preserving the cash flows of the Group for its working capital

requirements;

(v) the settlement of the borrowings substantially via the issuance of

ICULS will minimise the immediate dilution effects on the earnings per share of the Group (until and unless the ICULS are converted), which would otherwise arise from an equity issue; and

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(vi) the Warrants to be issued for free and the issuance of the ICULS

pursuant to the Proposed Debt Restructuring may raise proceeds as and

when the Warrants are exercised for new Haisan Shares at a pre-

determined exercise price or when the ICULS are converted (via

partially in the form of cash) in the future. This will provide an

additional source of funds to be used for the Group’s future expansion

and/or working capital requirements including the monthly repayment

of the principal and interest of the New Term Loans due to the Scheme

Lenders.

3.5 Proposed Private Placement The Proposed Private Placement will enable Haisan to raise funds to meet its immediate funding requirements without relying entirely on the equity funding from the existing shareholders of the Company. When implemented, the Proposed Private Placement will serve to increase the capitalisation of the Company and further strengthen the financial position of Haisan.

3.6 Proposed Exemption

As set out in Section 2.6 of this Announcement, ACV or OCY is obliged to undertake a mandatory take-over offer under the Code for the remaining Haisan Shares and convertible securities not already owned by ACV and OCY and the PACs with them after the Proposed Rights Issue in view of the Undertakings to enable the Minimum Subscription Level to be achieved and the obligation of OCY under the Put and Call Options with the Unsecured Lenders. The Proposed Exemption is proposed to allow, amongst others, the following: (i) Haisan to successfully complete the Proposed Rights Issue and the

Proposed Debt Restructuring

(ii) The Put and Call Option granted by OCY to the Unsecured Lenders are pursuant to the terms of the DRA; and

(iii) ACV and OCY to extend their support for the Proposed Rights Issue, a

critical component of the Proposed Regularisation Plan to address the

financial conditions of the Group. Without the Undertakings, no

assurance that the Proposed Rights Issue can be implemented as

capacity to underwrite the Rights Shares by third parties is challenging

under present circumstances.

It is not the intention of ACV, OCY and the PACs with them to undertake the mandatory take-over offer pursuant to Part III of the Code. Therefore, the Proposed Exemption, which is allowable under the provision of the Code (subject to amongst others, the approval of the non-interested shareholders and thereafter the SC) would provide an avenue for ACV and OCY, who are already the major shareholders of Haisan, to be exempted from undertaking the mandatory take-over obligation.

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4. EFFECTS OF THE PROPOSED REGULARISATION PLAN The Proposed M&A Amendments and the Proposed Exemption will not have any

effect on the share capital, consolidated net assets, gearing, consolidated earnings and substantial shareholders’ shareholdings of the Company.

The proforma effects of the Proposed Capital Reduction, the Proposed Rights Issue, the Proposed Debt Restructuring and the Proposed Private Placement are set out below:

4.1 Share Capital

The proforma effects of the Proposed Capital Reduction, the Proposed Debt Restructuring, the Proposed Rights Issue and the Proposed Private Placement on the issued and paid-up share capital of the Company are as set out in Table 3 of the Appendix of this Announcement.

4.2 Net Assets and Gearing

The proforma effects of the Proposed Capital Reduction, the Proposed Debt Restructuring, the Proposed Rights Issue and the Proposed Private Placement on the net assets and gearing of the Group, based on the audited consolidated financial statements of Haisan as at 31 December 2010, are as set out in Table 4 of the Appendix of this Announcement.

4.3 Shareholding Structure of Substantial Shareholders

The proforma effects of the Proposed Capital Reduction, the Proposed Debt Restructuring, the Proposed Rights Issue and the Proposed Private Placement on the shareholdings of the substantial shareholders of Haisan as at 30 November 2011, assuming that the Proposed Capital Reduction, the Proposed Debt Restructuring, the Proposed Rights Issue and the Proposed Private Placement had been effected on that date, are set out in Table 5 of the Appendix of this Announcement.

4.4 Earnings

The Proposed Capital Reduction is not expected to have any impact on the earnings of the Group. In view that the Proposed Regularisation Plan are expected to be completed by the second quarter of 2012, the Proposed Rights Issue, the Proposed Debt Restructuring and the Proposed Private Placement are not expected to have any effects on the earnings of the Group for the FYE 2011.

The Proposed Debt Restructuring is expected to result in annual interest

savings of approximately RM4.04 million arising from the reduction of

borrowings resulting from the following:

(i) interest payable on the debts of RM35.29 million waived by the

Unsecured Lenders;

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(ii) issuance of the Settlement Shares to partially settle the debts due to the

Unsecured Lenders; and

(iii) coupon rate of 4.5% per annum of the ICULS which is lower as

compared to the original average interest rate payable to the Unsecured

Lenders prior to the Proposed Debt Restructuring of 7.82% per annum.

Further, the Group will recognise a one-off gain of approximately RM35.29

million or EPS of up to 13.74 sen from the waiver of debt by the Unsecured

Lenders pursuant to the Proposed Debt Restructuring under the Minimum

Scenario.

The Proposed Rights Issue is expected to contribute positively to the Group as the Group will be utilising up to approximately RM10 million of the proceeds raised from the Proposed Rights Issue to fund the expansion of its TCL capacity in Malaysia and the interest savings arising from the partial repayment of up to approximately RM3.74 million of bank borrowings of approximately RM0.26 million per annum (assuming the average interest rate of 6.85 % per annum as at the 30 November 2011.) under the Maximum Scenario.

Subject to the level of return on equity generated by the Company from the

use of proceeds from the Proposed Rights Issue and the Proposed Private

Placement and proceeds arising from the exercise of the Warrants and the

conversion of ICULS (if any) and the future earnings of the Group, on a

standalone basis, the EPS of the Group may be diluted as a result of the

enlarged issued and paid-up share capital of the Company after the:

(i) Proposed Rights Issue,

(ii) issuance of the Settlement Shares to the Unsecured Lenders;

(iii) Proposed Private Placement; and

(iv) issuance of new Haisan Shares arising from the exercise of the

Warrants and the conversion of ICULS.

4.5 Convertible securities

As at 30 November 2011, Haisan has the Unexercised ESOS Options which when exercised are convertible into new Haisan Shares. In accordance with the By-Laws governing the ESOS, which will expire on 21 September 2013, the Proposed Rights Issue may give rise to certain adjustments to the exercise price and the number of outstanding ESOS Options. Any necessary adjustments arising from the Proposed Rights Issue, where applicable, will only be finalised by the Board at a later date. A notification to grantees of the ESOS Options explaining the mechanism of any adjustments to their ESOS Options will be issued immediately after the finalisation of the necessary adjustments. Save for the Unexercised ESOS Options, the Company does not have any other outstanding convertible securities in issue.

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5. APPROVALS REQUIRED

The Proposed Regularisation Plan are subject to and conditional upon approvals being obtained from the following: (i) the SC for the issuance of ICULS pursuant to the Proposed Debt Restructuring

and the Proposed Exemption;

(ii) Bank Negara Malaysia for the issuance of the Warrants to non-residents entitled shareholders and the issuance of the ICULS and Warrants to the Unsecured Lenders pursuant to the Proposed Debt Restructuring;

(iii) Ministry of International Trade and Industry for the Proposed Regularisation

Plan, if required; (iv) the sanction of the High Court pursuant to Section 64 (1) of the Act for the

Proposed Capital Reduction; (v) Bursa Securities for the following:

(a) the Proposed Regularisation Plan;

(c) admission of the Warrants and the ICULS to the Official List of Bursa

Securities and the listing of and quotation for the Warrants and the

ICULS on the Main Market of Bursa Securities;

(d) listing of and quotation for up to 498,406,255 the new Haisan Shares to

be issued pursuant to the Proposed Debt Restructuring, the Proposed Rights Issue and the Proposed Private Placement, on the Main Market of Bursa Securities; and

(e) listing of and quotation for up to 1,176,895,773 new Haisan Shares to be issued pursuant to the full conversion of all the ICULS and full exercise of the Warrants, on the Main Market of Bursa Securities.

(vi) the shareholders of Haisan at an EGM to be convened; and (vii) any other relevant authorities, if required.

6. INTER-CONDITIONALITY OF THE PROPOSED REGULARISATION

PLAN

The Proposed Capital Reduction and the Proposed M&A Amendments are inter-conditional upon each other.

The Proposed Rights Issue and the Proposed Debt Restructuring are inter-conditional upon each other and conditional upon the Proposed Capital Reduction and the Proposed M&A Amendments. The Proposed Rights Issue and the Proposed Exemption are inter-conditional upon each other.

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The Proposed Private Placement is conditional upon the Proposed Rights Issue and the Proposed Debt Restructuring.

The Proposed Regularisation Plan are not conditional upon any other corporate exercises undertaken or to be undertaken by Haisan.

7. INTEREST OF DIRECTORS, MAJOR SHAREHOLDERS AND PERSONS CONNECTED WITH THEM

7.1 Proposed Capital Reduction, Proposed M&A Amendments and the Proposed Private Placement

None of the other Directors and/or major shareholders of Haisan or persons connected to them have any interest, direct or indirect in the Proposed Capital Reduction, the Proposed M&A Amendments and the Proposed Private Placement.

7.2 Proposed Rights Issue, Proposed Debt Restructuring and Proposed

Exemption

Pursuant to the DRA, OCY, a Director and a major shareholder of the Company, will enter into Put and Call option agreements with the Unsecured Lenders to purchase the ICULS and the Settlement Shares to be issued to them pursuant to the Proposed Debt Restructuring. In addition, OCY and ACV have undertaken to subscribe for 80,000,000 Rights Shares with 40,000,000 Warrants for an aggregate amount of at least RM4.00 million under the Proposed Rights Issue, to fulfil one of the terms of the DRA. The above matters relating to OCY would nevertheless, not be considered as conflict of interests in view of the following: (i) the entering into the Put and Call option agreements with the

Unsecured Lenders for the purchase of the ICULS and the Settlement Shares was as a result of negotiations with the Unsecured Lenders. Without such commitment by him under the Put and Call option agreements, the DRA (to be varied by a supplemented agreement to be executed) may not be agreed and finalised by the Scheme Lenders; and

(ii) the Proposed Rights Issue would be undertaken on a renounceable basis made available for subscription to all the entitled shareholders on a pro-rata basis depending on their shareholdings on the Entitlement Date. The subscription of the Rights Shares by ACV and OCY, either directly or indirectly, are in exercising their rights as shareholders of the Company and the amount of at least RM4.00 million of Rights Shares required to be undertaken to be subscribed by them is a matter negotiated and agreed with the Scheme Lenders pursuant to the DRA.

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Nevertheless, OCY, OCC (being a person connected to ACV and a PAC) and Kamarudin Bin Md Derom (being a PAC to ACV and OCY) have on their own accord abstain from deliberating and voting at the Board meetings of Haisan pertaining to the Proposed Rights Issue, the Proposed Debt Restructuring and the Proposed Exemption in view of the following: (i) the Proposed Rights Issue and the Proposed Debt Restructuring is

inter-conditional upon each other; and

(ii) the Proposed Rights Issue and the Proposed Exemption is inter-conditional upon each other.

In addition, OCY, OCC, Kamarudin Bin Md Derom and ACV will also abstain from voting in respect of their direct and/or indirect interest, if any, on the resolutions pertaining to the Proposed Rights Issue, the Proposed Debt Restructuring and the Proposed Exemption to be tabled at an EGM to be convened. In addition, OCY, OCC, Kamarudin Bin Md Derom and ACV have also undertaken that they shall ensure that all persons connected with them will abstain from voting in respect of their direct and/or indirect interest, if any, on the resolutions pertaining to the Proposed Rights Issue, the Proposed Debt Restructuring and the Proposed Exemption to be tabled at an EGM to be convened. Save as disclosed above, none of the other Directors and/or major shareholders of Haisan or persons connected to them have any interest, direct or indirect in the Proposed Rights Issue, the Proposed Debt Restructuring and the Proposed Exemption.

8. DIRECTORS’ STATEMENT

Having considered all aspects of the Proposed Regularisation Plan, including inter-alia, the current financial position of the Group and in particular the rationale and benefits of the Proposed Regularisation Plan as set out in Section 3 of this Announcement, (i) The Board (save for OCY, OCC and Kamarudin Bin Md Derom) is of the

opinion that the Proposed Capital Reduction, the Proposed M&A Amendments and the Proposed Private Placement are in the best interest of the Group; and

(ii) The Board (save for OCY, OCC and Kamarudin Bin Md Derom is of the opinion that the Proposed Rights Issue, the Proposed Debt Restructuring, and the Proposed Exemption are in the best interest of the Group.

9. ADVISER

PIVB has been appointed as the Adviser for the Proposed Regularisation Plan (save for the Proposed M&A Amendments). The Board will appoint an Independent Adviser to advise the non-interested shareholders and non-interested Directors of Haisan on the Proposed Exemption in accordance with Practice Note 9 of the Code.

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10. SC’S GUIDELINES ON THE OFFERING OF EQUITY AND EQUITY-

LINKED SECURITIES (“SC GUIDELINES”)

The Board is not aware of any departure from the SC Guidelines in undertaking the Proposed Regularisation Plan.

11. ESTIMATED TIMEFRAME FOR SUBMISSION TO AUTHORITIES AND

COMPLETION

Barring any unforeseen circumstances, the following are the indicative timeline for the submission to the relevant authorities in relation to the Proposed Regularisation Plan:

(i) the applications to Bursa Securities, Bank Negara Malaysia and the Ministry

of International Trade and Industry will be made within two (2) months from the date of this Announcement;

(ii) the application to the SC for the proposed issuance of the ICULS will be made after the approval of Bursa Securities for the Proposed Regularisation Plan; and

(iii) the application to the SC for the Proposed Exemption will be made after the non-interested shareholders of Haisan has approved the Proposed Exemption.

Barring any unforeseen circumstances and subject to the fulfilment of all conditions as set out in the DRA (to be varied by a supplemented agreement to be executed), the Proposed Regularisation Plan are expected to be completed by the second quarter of the FYE 2012, the details are set out in Table 6 of the Appendix of this Announcement.

This announcement is dated 21 December 2011.

HAISAN RESOURCES BERHAD (“HAISAN” OR “COMPANY”) · 2011. 12. 21. · RM44,072,500 comprising 88,145,000 Haisan Shares (inclusive of 7,604,100 Haisan Shares held as treasury

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