Ho Hup shareholders set to endorse 60pc capital reduction plan

Under the revised plan, Ho Hup is proposing a 60 per cent capital reduction as opposed to 95 per cent proposed last October to substantially resolve the company's accumulated losses of RM110 million.

Managing director Lim Ching Choy said the lower capital reduction comes with the option to leverage on the company's 24ha landbank in Bukit Jalil, Kuala Lumpur.

That land has been earmarked for Jalil Green City, a RM2 billion mixed development project.

Lim said shareholders can either vote for the capital reduction plan or for the company to leverage on its core landbank to address the accumulated losses. Both options are set to help the company.
The revised plan calls for a proposed reduction of the existing issued and paid-up share capital of the company by 60 sen of the par value. Then, five shares of 40 sen apiece would be consolidated into two shares.

The new plan will see a private placement of 10 million shares to parties not related to the company's existing shareholders, and a rights issue of 30 million to existing shareholders.

The revised plan was introduced after taking into account shareholders' concern, Lim told Business Times in an interview in Kuala Lumpur.

The surge in the share price was also among the key factors that prompted Lim and his team to rethink their capital reduction proposal.

Ho Hup former managing director Datuk Low Tuck Choy had said the initial plan was not in the best interest of minority shareholders. Low, through Low Chee & Sons Sdn Bhd, holds 27 per cent of Ho Hup.

Low is trying to block the revamp plan and proposed another scheme to raise RM25.5 million from the sale of a renounceable one-for-one rights issue of 25.5 million irredeemable convertible preference shares (ICPS) with two warrants for each ICPS subscribed.

Low has also called for a special meeting on Thursday to remove seven of eight existing Ho Hup directors, including Lim and Ho Hup deputy executive chairman Datuk Vincent Lye Ek Seang.

While Low is not offering himself to be re-elected, he has proposed six appointees. He has said his younger brother, currently Ho Hup non-executive director Low Teik Kein, would remain on board as Low Chee & Sons' representative.

On Low's plan, Lim said that it would not fulfil the basic fundamental requirements to lift the PN17 status of Ho Hup.

Lim said this was because the amount of funding to be raised is insufficient for Ho Hup's debt management and working capital especially for the development of Jalil Green City.

There is also no guarantee that the free warrants will be exercised in the near future and thus, the RM51 million from their conversion is highly uncertain.

Lim added that with insufficient funding, uncertainties will continue to plague Ho Hup's continued operations and it could remain a PN17 company.

"We are focused on not only reviving Ho Hup, but also moving forward with new businesses. We have tried to engage Low on several occasions for discussions and had even written two letters to him but he did not respond," Lim said.