The Bangladesh Securities and Exchange Commission (BSEC) has recently conditionally allowed Sea Pearl Beach Resort & Spa to convert bonds worth Tk120 crore into ordinary shares after its request after failing to repay its bondholder.
In 2017, Sea Pearl raised Tk325 crore through a 20% convertible bond to increase the momentum of the business. The bond was fully subscribed by Investment Corporation of Bangladesh (ICB).
The company was supposed to pay Tk108 crore (principal plus interest) per year from the year 2020 to 2025. But it could not pay three instalments of the bond.
According to sources, Sea Pearl owes ICB more than Tk400 crore against its Tk325 crore bond. Following a two-year moratorium, Sea Pearl was set to begin semi-annual repayments from April 2020.
However, citing the pandemic that drastically reduced its hotel business capacity utilisation, the company did not pay any sum to ICB and hence, kept applying for waivers.
To refrain it from being a defaulter, the listed company even went to the High Court where it presented the pandemic as the reason behind the decline in its business and non-payments to ICB.
In November last year, Sea Pearl said ICB wrote to it requesting the conversion of Tk120 crore of the bond into ordinary shares.
In response to the request, the board of Sea Pearl approved the conversion of Tk120 crore into the company’s paid-up capital by the terms and conditions and compliance outlined in ICB’s letter and shareholders in its annual general meeting.
According to Sea Pearl, this conversion will lead to an easing of the company’s debt burden, resulting in an annual savings of Tk12 crore in financial expenses.
Also, this strategic move will strengthen the financial position significantly, enhancing its overall performance in the long run, it said in a recent disclosure.
The securities regulator, while giving the approval, said the conversion would be effective after disposal of a writ petition with the High Court.
The share price will be determined based on the agreement between both companies, it said. Besides, the converted shares will be locked for three years, said the regulator.
Sea Pearl’s Company Secretary Md Azaharul Mamun said the company has paid Tk73 crore to ICB until now.
The bond was issued to repay the existing debts, as well as to finance the completion of the Sea Pearl Beach Resort & Spa, Cox’s Bazar of Sea Pearl Beach Resort & Spa Ltd. Its tenure was 8 years from the date of issue, including a 2-year moratorium period for both principal and interest payment. The bond was set to be redeemed semi-annually with a 10% coupon rate. Green Delta Insurance Company Ltd was the trustee of the bond.
According to the financial statement for the first half of the current fiscal year 2023-24, Sea Pearl earned revenue of Tk107.15 crore, which was Tk110.22 crore in the same period of the previous year.
During the period, its profit after tax decreased by 21% to Tk33.54 crore from Tk42.27 crore compared to one year ago.
In the first half of FY24, the company’s earnings per share stood at Tk2.78 and its net asset value per share was Tk18.45.
In the December quarter, its revenue stood at Tk47.68 crore, which was Tk67.24 crore a year ago.
Its net profit stood at Tk13.96 crore, down from Tk26.90 crore compared to the same period of the previous year.
As of 31 January 2024, sponsors and directors jointly held 46.43% of shares, institutions 23.60%, foreign investors 2.89%, and general investors 26.68% of the company.
The share price of the company closed at Tk98.80 on the Dhaka Stock Exchange on Thursday.
BSEC Sea pearl bond shares 120 crore