Gran Hengwei Group Holdings (08219.HK) announced on December 24 that the company proposed "two rights issues and one" rights issue, offering 50 million rights shares to raise HK $11 million at a discount of HK $0.22 per rights share (a discount of about 22.81% to the closing price of HK $0.285 per share on December 23).
The maximum estimate of the net proceeds from the rights issue (after deducting estimated expenses) is about HK $10 million. The company intends to use approximately 70% of the net proceeds from the proposed rights issue (I) to repay the group bank loans and loans; and (ii) approximately 30% of the net proceeds as the general working capital of the group.
The company has considered other fund-raising options available to the group, including debt financing. The company believes that debt financing will lead to an additional interest burden and further increase the group's asset-liability ratio. The Board is of the view that it is prudent to use long-term financing options to finance the long-term development of the Group, especially in the form of equity which will not increase the financing costs of the Group. In addition, the Board is of the view that the rights issue can improve the Group's indebtedness, strengthen its capital base and enhance its financial position, and make future strategic investments when opportunities arise.