SINGAPORE (April 21): Shareholders of Healthway Medical Corporation will vote on two resolutions in an extraordinary general meeting today.

The EGM is held amid a 4.2 cents voluntary conditional cash offer for HMC by Lippo-linked Gentle Care.

The first resolution is the proposed issuance of S$60 million in convertible notes to Singapore private equity firm Gateway Partners by HMC.

The second is the proposed acquisition of Healthway Medical Enterprises (HME), a chain of 24 clinics.

If both resolutions are approved, HMC will receive gross proceeds of S$60 million from the issuance of convertible notes to Gateway. About S$24 million will be used to meet its short-term cash needs while the other S$36 million will be used to complete the acquisition of HME.

This is the second tranche of a total of S$70 million notes issuance. Already, S$10 million of convertible notes has been issued to Gateway in the first tranche.

And if all the notes in the second tranche are fully issued and converted by Gateway, it would represent a 45.7% stake in HMC’s enlarged share capital.

Although a stake above the 30% threshold would trigger a voluntary general offer, Gateway has repeatedly said it does not intend to make a general offer for the company.

However, if the first resolution is not approved, HMC will have difficulties continuing as a going concern.

The net proceeds of S$8.3 million HMC received from Gateway for the issuance of first tranche of notes have already been fully utilised for the payment of remaining salaries for February and March.

After the EGM, there is nothing to stop HMC shareholders from accepting the offer which expires on May 2.

As of Wednesday, Gentle Care owns 23.43% of HMC.

However, if the total number of shares pledged to Gentle Care do not cross 50%, it would have to return the acceptances.

As for Gateway’s action of selling the first tranche of S$10 million convertible notes soon after they were issued, the private equity firm explained it did not want to be left as a 10.7% shareholder with no influence in HMC in the event the S$60 million notes are not approved.

But if issuance of the S$60 million notes is approved, Gateway will disburse the full amount to HMC.

Shares of HMC closed at 0.4 Singapore cent on Thursday.