Vertex gears up for power venture with US$4m bond
Media firm Vertex Communications & Technology Group is building a war chest for its foray into Hong Kong's electricity market by selling US$4 million worth of bonds to an arbitrage fund.
Vertex, through part-owned subsidiary Coastal Power, agreed to issue five-year redeemable convertible bonds to LIM Asia Arbitrage Fund, an Asian hedge investor that specialises in bond arbitrage and which is headed by former director of BZW Asset Management George Long.
The fund-raising exercise will help pay for Coastal Power's 15 per cent stake in China Hong Kong Power Development, a joint-venture owned 50 per cent by China Power International Holding - headed by Li Xiaolin, daughter of former premier Li Peng - and 35 per cent by state-owned China Southern Power Grid. Coastal Power will pay $3 million for the remaining 15 per cent.
It will also help to finance business development by China Hong Kong Power, which aims to spend about $100 million to begin supplying electricity at the Shau Tau Kok border as soon as the middle of this year, assuming government approval is obtained.
The Shau Tau Kok venture marks the first step in an ambitious plan to break into service areas of century-old suppliers CLP Power in Kowloon, the New Territories and Lantau and Hongkong Electric on Lamma and Hong Kong islands.
The bonds are due to mature in 2011 and can be converted into 111,111 Coastal Power shares at an initial price of US$36 a share, giving LIM Asia a 10 per cent stake in the firm upon conversion.
Vertex's stake in Coastal Power will then shrink to 72 per cent from 80 per cent, while the stake of the other substantial shareholder, Kuwait's former minister of oil and finance, Sheikh Ali Khalifa Athbi Al Sabah, will be diluted to 18 per cent from 20 per cent.
LIM Asia, which has been listed on the Irish stock exchange since 1996, is already a Vertex shareholder, with 16.01 million shares and 25 million warrants in the company.
Vertex's stock closed yesterday one cent lower at 52 cents.
Mr Long did not return calls seeking comment.
