In the latest effort to tackle its massive debt, embattled Pace Development Corporation Plc plans to raise funds through recapitalisation and the sale of two residential projects whose acquisition value could be 14.5 billion baht.
"Our plan is to focus on short-term reductions in debt and interest [payments], and we will achieve this by selling some existing assets, realising revenue immediately, as well as increasing the company's capital through the rights offering to existing shareholders," said Pace Development chief executive Sorapoj Techakraisri. "These two major steps will enable the company to reduce the debt-to-equity ratio to 1.5."
Pace Development has entered into a memorandum of understanding (MoU) for the sale of the entire Nimitr Langsuan development, as well as the remaining unsold units, plus 25% of the total units at The Ritz-Carlton Residences Bangkok in the MahaNakhon building, to Sansiri Plc, which is now in the process of conducting due diligence.
If the terms of the MoU are fulfilled, the transaction is expected to be completed in 2018.
Pace plans to use the income generated to reduce its debt with major creditors, the company said in a release.
"As one of Pace Development's financial supporters, Siam Commercial Bank agrees with the recapitalisation plan, which will help uplift Pace Development's financial situation," said SCB chief executive Arthid Nanthawithaya. "The plan will help lower short-term financial obligation and will strengthen the foundation for sustainable growth in the future. SCB is pleased to support and continue to work with Pace Development in the foreseeable future."
Recent reports said SET-listed developer Singha Estate Plc was keen to take over projects owned by Pace, which was being forced to repay loans to SCB.
Nattavuth Mathayomchan, Singha Estate's chief residential development officer, said the company studied all of Pace's property projects, which were in the high-end segment, and found the land bank was best suited to development.
Singha Estate, along with SET-listed Sansiri Plc, had expressed interest in buying Pace's projects after Pace struggled with hefty financial liabilities.
A source in banking circles said that the remaining 53 units of the Ritz-Carlton Residences Bangkok at MahaNakhon will be sold to Sansiri if the deal goes through, a transaction that could be worth 6.5 billion baht, while the Nimitr Langsuan purchase could have a value of 8 billion.
Pace has three other projects on hand, including The Ritz-Carlton Residences Bangkok at MahaNakhon, which it reported in March as 75% sold, with 7 billion baht pending in revenue recognition.
There is also the luxury villa resort MahaSamutr, worth 4 billion baht, which was 30% sold, with 1.4 billion baht awaiting revenue recognition.
The luxury condominium Nimitr Langsuan is worth 7.5 billion baht and is sold out, but the project has yet to begin construction.
As part of the recapitalisation, Pace will offer 7.52 billion newly issued shares to existing shareholders at a price of 50 satang each for 3.76 billion baht.
The company's shareholders will have a right to subscribe to two new shares for every one share held during Jan 9-15, 2018.
The subscribers will be entitled to a free unit of warrant 1 for every five newly issued shares bought, and they will get a free unit of warrant 2 for every three newly issued shares.
Each unit of the six-month W-1 can be converted to one new share at the exercise price of 80 satang, while each unit of the five-year W-2 can be converted to one new share at a price of two baht each.
The luxury property developer will also issue another 1.5 billion newly issued shares through private placement.
"The proceeds from the recapitalisation will be used to pay back debt, including bonds and bills of exchange, eliminating most of the firm's short-term debt obligations as well as for project development, and providing a platform for expanding the company's future business," Pace said.
PACE shares closed on Wednesday on the Stock of Exchange at 0.96 baht, down 32 satang, in trade worth 482 million baht.