TRUBB Provides Clarification on Investment Approval in WFX
Thai Rubber Latex Group Public Company Limited, also known as TRUBB, has issued a statement to clarify the details surrounding its recent approval of an investment in World Flex Public Company Limited (WFX). The company seeks to address concerns regarding the proportion of shares held by Latex Systems Public Company Limited (LS) in relation to the guarantee of long-term loans.
Response to Securities and Exchange Commission Office Questions
TRUBB responded to inquiries from the Securities and Exchange Commission Office by providing the following explanations:
Question 1: The Scrutiny Committee requested clarification on the LS credit facilities and the parties responsible for securing them. Additionally, they inquired about the share of warrants held by each LS shareholder and the conditions set by commercial banks when converting contracts into long-term loans.
Answer 1: The LS credit facilities in question were initially established through a contract signed in 2019. Mr. Vorathep Wongsasuthikul, on behalf of TRUBB, acted as the guarantor for all credit limits between LS and himself, ensuring that no returns are taken into account.
Furthermore, it was stated that no other LS shareholders have provided a guarantee for this loan agreement.
TRUBB and LS have engaged in negotiations for over two years regarding debt restructuring, particularly in relation to guarantee terms. This is due to the commercial banks’ requirement for sufficient collateral in accordance with their conditions.
Most of LS’s assets have already been pledged to other commercial banks, limiting the availability of collateral. However, discussions are ongoing, and the latest negotiated terms include a 5-year long-term loan agreement with the first installment commencing in early 2024. The conditions stipulate the need for adequate collateral, which includes LS land in Rayong valued at approximately 12 million baht, shares of WFX valued at approximately 98 million baht, and a personal guarantee from Mr. Vorathep Wongsasuthikul, the president of TRUBB.
Question 2: The Board of Directors and the Audit Committee’s decision to underwrite LS, regardless of their shareholding, has raised concerns. LS’s previous operating performance showed consistent net losses and large negative shareholders’ equity. Approving such a transaction, which deviates from the proportional shareholding, does not appear to be in the best interest of TRUBB and its shareholders. Please provide clarification on this matter.
Answer 2: Despite the underwriting amount exceeding TRUBB’s current shareholding in LS (51.76% of total shares), the decision to provide additional guarantees reflects TRUBB’s ongoing agreement to acquire shares from other LS shareholders. It is anticipated that by the fourth quarter of 2023, TRUBB will hold more than 70% of LS, surpassing the guaranteed ratio.
Prior to LS’s conversion to a public company in 2018, it consistently generated net profits. LS had also filed a plan to list on the Alternative Investment Market in 2019. However, ongoing net losses and negative shareholders’ equity were attributed to external factors such as the decrease in Chinese tourists visiting Thailand following a tragic incident involving a tourist boat in 2018. The COVID-19 pandemic further exacerbated LS’s sales decline, considering its strong reliance on the Chinese market.
Despite these challenges, LS has implemented organizational restructuring and cost-saving initiatives, resulting in reduced operating losses. With products like latex pillows and mattresses in high demand globally for their environmental benefits, LS aims to return to profitability. In the future, LS plans to relist on the Stock Exchange of Thailand to raise funds for further growth.
The debt restructuring process necessitated negotiations with commercial banks to convert short-term loans into long-term ones. Additional collateral was required to meet the banks’ demands. This debt restructuring will provide LS with increased liquidity, enabling continuous operations and future profitability.
Approving this transaction brings several benefits to TRUBB:
- LS can fully repay its debts within six years, allowing for future profits and dividends for shareholders.
- Enhanced business benefits for TRUBB through increased efficiency and value addition via vertical integration within the concentrated latex supply chain.
- Failure to assist with the debt restructuring could lead to LS’s bankruptcy, impacting TRUBB’s credit line guarantees with other financial institutions and resulting in a significant loss for the latex mattress and pillow business.
- TRUBB may face negative repercussions from financial institutions, partners, and investors.
The Board of Directors thoroughly evaluated the situation and weighed the potential outcomes, taking into consideration the best interests of the company and its shareholders. The decision to proceed with the transaction aligns with the beneficial impact it will have on TRUBB and its stakeholders. Thus, the company is obligated to disclose the relevant information about these transactions.
Considering the aforementioned factors, TRUBB has made a careful and informed decision to undertake these transactions, taking into account the potential impact on the overall business and the interests of its shareholders.
#TRUBB #No Hoon – Thai Rubber Latex Group Public Company Limited or TRUBB clarify information regarding the approval of investment inWorld Flex Public Company Limited or WFX to guarantee long-term loans by givingLatex Systems Public Company Limited or LS not in accordance with the proportion of the share
The Company explained in response to questions from the Securities and Exchange Commission Office as follows:
Question number 1 TRUBB revealed that the LS credit facilities above are co-guaranteed by other persons and assets. therefore he asked the Scrutiny Committee to explain the fact that By whom is the said LS credit facility secured? What is the share of warrants for each shareholder of LS? And what are the conditions of commercial banks when converting contracts into long-term loans? In this regard, submit relevant documents and evidence at the same time.
Answer number 1The above line of credit is the original line of credit LS entered into the contract in 2019. Mr. Vorathep Wongsasuthikul on behalf of the presidentThai Rubber Latex Group Public Company Limited As a guarantor, responsible for guaranteeing all credit limits that do not calculate returns betweenLatex Systems Public Company Limited with Mr. Vorathep Wongsasuthikul in any way
2. The other LS shareholders have not provided a guarantee for this loan agreement.
3. TRUBB and LS have negotiated thedebt restructuringwith the bank for more than 2 years, especially the guarantee terms Because the bank requires sufficient collateral for the total credit limit in accordance with the bank’s conditions.
However, most of LS’s assets have already been pledged with other commercial banks and TRUBB has informed that the full amount of collateral cannot be used as collateral as well. The discussions continued. The latest negotiated terms that can be agreed on the debt restructuring. which is a 5 year long term loan agreement, the first installment will start in early 2024 And there is a condition that there must be enough collateral for the debt limit, namely
3.1 LS land in Rayong, about 12 rai, worth about 12 million baht.
3.2 Shares of World Flex Public Company Limited or WFX There are about 40.8 million shares worth about 98 million baht.
3.3 Mr. Vorathep Wongsasuthikul, President of Thai Rubber Latex Group Public Company Limited, personal guarantee.
Question number 2What factors has the Board of Directors or the Audit Committee considered before approving the transaction? TRUBB entered into underwriting LS regardless of its shareholding. And because in the past LS operating performance seemed to be a continuous net loss. and has a large number of negative shareholders’ equity. Approval to undertake a transaction Such guarantee is not in accordance with the share share. How is this in the best interests of TRUBB and TRUBB shareholders in general?
Answer number 2 Although TRUBB guarantees the amount of the investment more than the share of TRUBB’s investment in LS by TRUBB currently holds 51.76% of shares in LS. of the total shares andA related person holds a further 21.84%In this regard, the main reason TRUBB provides warrants in excess of the current shareholding is because TRUBB In the process of making an agreement to buy shares from other shareholders, which will result in TRUBB holding more than 70 percent of LS by the fourth quarter of 2023. which is greater than the guarantee ratio
In the past, prior to the conversion to a public company in 2018, LS has consistently generated net profit. from a financial adviser LS has already filed a plan to list on the Alternative Investment Market (May) in 2019. However, the fact that LS has a net loss is ongoing. and had a large amount of negative shareholders’ equity starting the year 2019 as a result of the sinking of a tourist boat carrying Chinese tourists in Phuket in July 2018, leading to a decrease in the number of Chinese tourists coming to Thailand. This affects LS sales, which are mainly focused on the Chinese market. And part of it comes from the Covid 19 situation, which started at the end of 2019 and started to subside at the beginning of the year.
However, LS has always tried to solve the problem of losses. with organizational restructuring cost down leading to less operating losses therefore, a trend can generate profits in the future because of the pillow and latex mattresses It is also a product that is popular with people users all over the world. because it is a green product that helps reduce greenhouse gas emissions In addition, latex cushions and mattresses are businesses that use a large amount of latex as a raw material. So, it is good for the overall picture of TRUBB’s concentrated latex business andIf it can consistently return to profitability, LS plans to return to listing on the Stock Exchange of Thailand to raise funds again.
In the process of financial restructuring, LS has negotiated with a commercial bank to restructure debt from a short-term loan to a long-term loan. As a result, the bank demands additional collateral. In order to be sufficient for long-term loans, which was when LS has restructured such loans from the bank It will help to add more liquidity to LS, allowing LS to operate continuously. and return to profit again in the future
Approving such securities transactions with LS brings significant benefits to the Company as follows:
1. LS can pay debt within 6 yearsAnd can return profits to shareholders and receive dividends starting in the 7th year
2. Improve business benefits (Synergy) to TRUBB by increasing efficiency and adding value. from processing concentrated latex raw materials to products through value chain integration (Vertically Integrated Supply Chain)
3. If TRUBB does not assist with the debt restructuring, LS will go bankrupt in business, TRUBB is responsible for credit line guarantees with other financial institutions, TRUBB and TRUBB shareholders will be affected as follows: Loss of total value latex mattress pillow business (Total Loss)
4. TRUBB will be negatively affected by financial institutions. partners and investors
In this respect, from the incident mentioned above, the Board of Directors have considered this matter carefully with prudence and care to the best of their ability. taking good results into account side effects and was of the opinion that such approval would be more beneficial to the Company and the shareholders in general, therefore it was decided that TRUBB enter into the transaction as a guarantee for debt restructuring such this time in accordance with the underwriting rate Consequently, the company must disclose information about such transactions.
For the reasons mentioned above, therefore, the Company must undertake such transactions. By taking into account the business impact in all dimensions that will affect the company. and the general shareholders of the Company as well.
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