March 11, 2005
DBSAM investors may face big loss under Citiraya's bailout plan
In a worst-case scenario, they may forfeit 75% of their investment value
By Goh Eng Yeow
HOLDERS of units in funds managed by DBS Asset Management (DBSAM), who were shocked this week to find they are indirect shareholders of beleaguered Citiraya Industries, are in for another surprise.
It emerged yesterday that if a bailout plan now on the table goes ahead, they could lose up to three-quarters of the value of their investment, in a worst-case scenario.
This is based on the average cost of DBSAM's holdings working out to 44 cents per share.
The offer price under the current rescue plan proposes to issue new shares at between 12 cents and 25 cents apiece, depending on valuation calculations.
The potential hefty loss for DBSAM investors follows revelations on Tuesday that it has 9.31 per cent of the waste recycling specialist, spread over 13 funds, because of purchases made during the second half of last year.
This makes it the second largest shareholder of Citiraya, after co-founder Ng Teck Lee, who has left Singapore and is uncontactable.
Despite the bailout now being considered, DBSAM spokesman Ronald Chong told The Straits Times yesterday in response to queries: 'We are also open to having discussions with any party that can help to enhance the value of our investment.'
Referring to the rescue plan, he added: 'We are awaiting more information and disclosures from Citiraya before we can assess the proposed deal.'
Citiraya, which has been suspended from trading since late January, is under investigation by both the Commercial Affairs Department (CAD) and the Corrupt Practices Investigation Bureau.
White knights appeared about two weeks ago in the form of an investment consortium led by Mr Koh Boon Hwee, a former Hewlett-Packard managing director, and fund manager Low Check Kian. They propose to take a 70 per cent stake in the enlarged capital of Citiraya.
Yesterday, Mr Chong emphasised that Citiraya and its advisers will have to find a solution that is in the best interests of the company and its shareholders. 'Being an investor of Citiraya, we welcome any move to restore confidence and credibility to Citiraya,' he said.
However, in another development, the president of the Securities Investors Association of Singapore, Mr David Gerald, said in a statement yesterday after meeting Citiraya's directors that the proposed investment by Mr Koh and his team is 'in the interests of the company and its stakeholders'.
He said he supported a continuing trading suspension while the investigations are ongoing.
Market observers noted that DBSAM may be the party which holds the key to Citiraya's survival.
This is because it is unclear how the rights to co-founder Mr Ng's 27.3 per cent stake, held under Credit Suisse (Singapore) Nominees, can be assigned in any extraordinary general meeting to vote on any rescue package.
One stockbroking director yesterday suggested that a fairer deal for existing Citiraya shareholders might be a rights issue to raise the $50 million to $100 million needed to bail the company out.
The white knights could then underwrite the rights issue, and take up any unsubscribed shares.
DBSAM yesterday also shed light on its 'unintended oversight' in failing to report that its total shareholdings of Citiraya had crossed the 5 per cent reporting threshold.
'The practice in the past was to report holdings at the individual fund level,' said Mr Chong, but now it would report 'aggregated holdings across all funds managed by DBSAM'.