LONDON (Alliance News) - Matomy Media Group Ltd on Monday said a bondholder meeting will take place by proxy on Wednesday where two proposals will involve the possible declaration of an event of default.
Shares in Matomy closing down 16% at 4.98 pence.
Matomy has outlined a proposed plan for an agreement with both its bondholders and with Rainmaker Investments GmbH, the minority shareholder in the Team Internet AG media company.
Matomy raised USD30.0 million in February through the issue of 101,000 units of convertible bonds, with a coupon of 5.5% a year. Proceeds were intended to be used to acquire an additional 10% in Team Internet, taking its holding to 90%, with the final 10% expected to be bought in November.
In November, Matomy said it was in talks to alter the terms by which it will purchase the final 10% Team Internet stake from Rainmaker. Matomy was also seeking to defer the payment for the stake acquisition.
Moreover, it was also seeking to revise the terms of its outstanding bonds.
On Monday, however, Matomy announced that its bondholders will consider two proposals at a meeting. These proposals will involve a possible event of default declaration under the terms of the bond and the immediate repayment of all bond amounts under the bonds.
Matomy plans to enter immediately into a discussion for a comprehensive agreement with both its bondholders and with Rainmaker.
Matomy also said that "no event of default has occurred and that therefore there is no basis to declare such event".
"A declaration of an event of default may adversely affect any discussions with Rainmaker concerning the terms of purchase of the remaining 10% stake in Team Interment and may prompt Rainmaker to pursue its various contractual remedies. To the extent Rainmaker is successful in doing so, the value for bondholders may decrease dramatically," Mtatomy added.
Matomy is proposing an up to USD10 million fund raising - with participation commitment from key shareholders representing approximately 55% of its share capital.
Furthermore, Matomy also proposes discussions with Rainmaker regarding the terms of purchase for the final 10% of Team Internet with the aim to reduce or change payment terms.
Adjustment of the payment schedule of the principal bond amount is also proposed, advancing a partial repayment in 2019 together with extending the overall payment period to 2022 with no reduction in the overall amount.
Bond covenants will also be altered to "reflect Matomy's actual current business structure" with Matomy willing to consider a certain interest increase in relation to these adjustments.
Bondholders will also be granted additional security tied to Matomy's financial assets.
"Matomy believes that its plan, if approved by all parties, is significantly more advantageous to the bondholders than the proposed declaration of default. It provides higher likelihood of payment of all amounts under the bond. In addition, it includes a funding by shareholders that would not be achieved in the event of declaration of default. As such, the shareholder financing would also put Matomy in a better position to make payments to Rainmaker and acquire a 100% interest in Team Internet," Matomy said.
Earlier on Monday, Matomy said it has formed an independent sub-committee of its board and engaged an independent legal counsel to interpret letters of support from key shareholders.
The letters of support were provided by a number of shareholders who hold, according to Matomy's available information, approximately 30% of Matomy's voting share capital.
The letters of support pertain to the Israeli-based digital marketing firm planned convertible bond issue.
Matomy is looking to revise the terms of its outstanding bonds. Matomy raised USD30.0 million in February through the issue of 101,000 units of convertible bonds, with a coupon of 5.5% a year. Proceeds were intended to be used to acquire further Team Internet stake.
According to Matomy, the letters of support read: "We confirm that the undersigned agreed to provide sufficient financial support, if necessary, to the company to ensure that the company can continue its operations for at least twelve months from December 27 2017, the date of filing of the prospectus in connection with the contemplated convertible bond issuance".
"All eligible shareholders will have the right to participate under the same terms, which will be determined by the board, subject to receipt of any applicable shareholder approvals," the letters add.
In connection with the letters of support, Matomy has received two further letters which provide, Matomy said, "various conflicting claims in connection to the intent and interpretation of the letters of support".
One of these letters comes from Rainmaker and the other was from the legal counsel to the shareholders to who provided the letters of support.
Matomy said it has formed an independent sub-committee and "engaged an independent legal corporate expert" to help interpret the "correct interpretation of the letters of support and the required actions, if any, in connection therewith".