Bangkok, 24 April 2019 – The SEC urges the shareholders of G J Steel Public Company Limited (GJS) to exercise their voting right regarding GJS proposal to give financial support to G Steel Public Company Limited (GSTEL), the major shareholder holding 18.8 percent of GJS shares, at the company’s annual general meeting to be held on 29 April 2019. In this matter, the independent financial advisor (IFA) has opined that the financial support transaction is inappropriate and should not be ratified.
GJS will seek the annual general meeting’s
resolution to ratify the financial support transaction for GSTEL in the form of
short-term loan worth not exceeding 94 million baht without any collateral for
the principal repayment period no longer than six months at the interest rate
of 12.5 percent per year. The GJS Board of Directors approved the loan proposal
on 16 March 2017. The GJS Board extended the loan repayment from 15 November
2017 to 15 May 2019 because GSTEL was procuring external funding sources. GJS had
extended the repayment period once before.
IFA has expressed the opinion that the shareholders should not ratify the
financial support transaction because the loan interest rate is inappropriate and
lower than the GJS financial costs of 14.85 percent per year. Besides, the
proposed loan has no collateral, no guarantor and no default interest rate. The
second extension of the loan repayment period aims to prevent GSTEL from
defaulting on the loan agreement with GJS. In this regard, IFA has not received
any evidentiary documentation or sufficient, reasonable commitment to the loan repayment
within 15 May 2019 because GSTEL ceased its production and no longer generates
income. In addition, many GSTEL creditors are filing lawsuits against the
company for debt repayment. IFA therefore views that it is unnecessary to
extend the repayment period as the extension is unlikely to benefit GJS.
Nevertheless, the GJS Board of Directors views that the financial support transaction
is reasonable and will benefit the overall financial restructuring of the group
of companies because the interest rate quoted on GSTEL is consistent with the
long-term financial costs of GJS and the loan will help to manage GSTEL’s tax
debt to the Revenue Department at an approximate amount of 90 million baht
while GSTEL is unable to secure external funding sources. In addition, GJS has
sufficient cash flows and liquidity to support the short-term loan to GSTEL
without collateral, and seeking the annual general meeting’s resolution for ratification
of the financial support transaction is in compliance with corporate governance
principles.
The aforesaid loan transaction is considered a related party transaction because
GSTEL holds 18.8 percent of the total GJS shares, through direct and indirect
shareholding; thus, it must be approved by the shareholders’ meeting with at
least three fourths of the total voting shares of the attending shareholders,
excluding the votes of persons with a conflict of interest.
The SEC therefore advises that the GJS
shareholders study related information thoroughly and inquire GJS executives
for further details and clarification in order to make a well-informed decision
and exercise the voting right to protect their own interest.
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