Hedge fund challenges NagaCorp convertible bond deal

Hedge fund Nine Masts Capital is challenging the revised terms of the convertible bond deal between NagaCorp and its founder, arguing that the agreement would short change minority shareholders, Bloomberg Quint reports.

In March, NagaCorp reduced the conversion price of convertible debt that the company issued to chief executive Tan Sri Dr. Chen Lip Keong.

Nine Masts, which owns 0.9 percent of NagaCorp, said the bond conversion terms unfairly and excessively diluted shareholders other than Dr. Chen.

James Tu, managing partner of Nine Masts argued that NagaCorp should use a different formula for calculating the conversion price, which would make it  HK$1.8242, 19 percent higher than the price set by the company.

In June, Dr. Chen said he planned to simultaneously exchange both the TSCLK Complex and NagaCity Walk bonds, rather than his previously planned staggered conversion.

The proposed concurrent conversions will bring Dr. Chen’s interest in the company to around 65.42 percent.

Under Nine Mast’s proposed higher conversion price, which is calculated using a method that protects minority shareholders against dilution, Chen’s stake would be just under 63 percent, according to calculations by Bloomberg.

The conversion deal still requires a whitewash waiver, which will undergo shareholder approval at the EGM on July 21.