SINGAPORE (Oct 3): Just a week after it was slapped with a notice of compliance (NOC) by Singapore Exchange Regulation (SGX RegCo), DLF Holdings announced Thursday it is taking an interest-free loan of $500,000 from founder Manfred Fan Chee Seng.

Repayable within six months from the date of the loan agreement on Oct 2, 2019, DLF says in a bourse filing that the loan will be used for the group’s general corporate and working capital purposes. 

Fan, currently DLF’s chairman and executive director, owns 26.8 million shares in the company, representing 22.11% of its entire issued share capital.

In a sale and purchase agreement (SPA) dated Sept 20, Fan and DLF’s former chief executive Wong Ming Kwong sold a combined 57.16% stake in the company to QRC, a consultancy solely owned by one Enomoto Hiroyuki.

The 45 million shares from Wong and 24.2 million shares from Fan were sold for a total of $5.6 million, or 8.1 cents per share.

The acquisition triggered an 8.1-cent mandatory takeover offer by QRC.

This triggered a query from SGX RegCo on Sept 23, asking the company to explain why both Wong and Fan had entered into the SPA to sell their shares at a price that represented a steep 54.5% discount from DLF's volume-weighted average price (VWAP) of 17.8 cents for the month up to Sept 5.

The SPA price also represented a 29.6% discount and 4.71% discounts to the one-year and six-month VWAPs, respectively.  

The regulator also wanted full disclosure on other developments in the group, particularly its changes to the board and key management as well as the termination of a key project after its initial public offering (IPO) in July last year.

DLF’s troubles did not end there. On Sept 26, the company was hit with a NOC calling for a more detailed explanation behind the SPA. 

See: SGX hits DLF with notice of compliance linked to SPA that triggered mandatory offer

In particular, SGX RegCo mandated DLF’s independent directors (IDs) to scrutinise the bases taken into consideration by independent financial advisors (IFAs) in arriving at an opinion for the offer.

DLF was also required to set out the “detailed justifications and bases in arriving at their recommendation to shareholders” in an offeree circular that would be dispatched to shareholders. 

In a regulatory filing some three hours after receiving the NOC, DLF highlighted the deterioration of its balance sheet and income since its IPO, citing the loss of $5.7 million for the six months ended June, compared to the profit of $1.8 million for the same period in the preceding year. 

In addition, DLF said that its net asset value (NAV) per share had plunged 90% to $0.0045 as at end June, compared to $0.0515 as at end December, or five months after its listing. 

“Based on the above factors, Mr Fan feels that the offer price of $0.081 is reasonable especially considering the illiquidity of this stock. As such he has entered into the SPA on a willing buyer, willing seller basis,” the group said. “[Fan] feels that this mandatory unconditional cash offer gives minorities an opportunity for those who want to exit in view of the recent poor financial results and illiquidity of the stock.”

The group noted that although QRC had approached Fan in early September, Fan did not agree to sell his shares till Sept 20, when both sides agreed on the price of $0.081.

See: DLF says SPA offer price 'reasonable' in response to SGX RegCo query

With regards to the loan, the company says that its board and audit committee are of the view that the loan is not prejudicial to the interests of the company and its minority shareholders. 

 “The company is however not required to seek shareholders’ approval pursuant to Rule 906 of the Catalist Rules as it is an interest free loan,” it adds. 

As at 4.23pm, shares in DLF Holdings are trading flat at 18.5 cents.