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Lippo unit buys S$15m Healthway convertible notes

SINGAPORE — Two days after shareholders of Healthway Medical Corp overwhelmingly approved a S$60 million convertible notes deal with private equity firm Gateway Partners, a quarter of the issuance will be sold to Gentle Care, which is making a takeover offer for the clinic operator.

SINGAPORE — Two days after shareholders of Healthway Medical Corp overwhelmingly approved a S$60 million convertible notes deal with private equity firm Gateway Partners, a quarter of the issuance will be sold to Gentle Care, which is making a takeover offer for the clinic operator.

In a filing with the Singapore Exchange on Sunday night, Gentle Care, a unit of Indonesia’s Lippo Group, said it had agreed to buy S$15 million of the notes tranche from Gateway for about S$18.6 million. The purchase consideration was determined on the “see-through” price — being S$0.042 a share that Gentle Care is offering to take over Healthway — multiplied by the 443,262,411 shares that the notes can be converted into. This would represent 13.86 per cent of the enlarged share capital of Healthway.

Gateway issued a statement later on the same night saying it had received an offer from Gentle Care for all the convertible notes owned by Gateway, but it declined as “it is our intention (as we reiterated on Friday at the company extraordinary general meeting) to remain a long-term partner and work hard to ensure Healthway realises its potential”.

Gentle Care then sought to purchase Gateway’s holdings of Healthway that, when converted, will bring the stake above the 30 per cent level that would have required the private equity firm to make a general offer for the clinic operator. Gateway then agreed to sell S$15 million face value of the convertible notes to Gentle Care.

“Both Gentle Care and Gateway will be large shareholders in the company going forward … Healthway’s business currently is going through difficult times. We need to focus the management on the turnaround of the business and we want to make sure that all stakeholders are aligned towards this objective. This will help provide certainty to patients, doctors, employees and suppliers, and will stabilise the company overall,” Gateway said.

Following Sunday’s announcements, shares of Catalist-listed Healthway fell S$0.001, or 2.3 per cent, to close at S$0.042 yesterday.

Investors TODAY spoke to previously had raised concerns about Gateway making a quick profit out of Healthway’s financial problems. However, Mr David Gerald, president and chief executive of investor rights advocate Securities Investors Association Singapore (SIAS), said: “If Gateway had not injected the capital, Healthway would have collapsed and the shares would have been worth nothing.”

“Healthway is in dire straits as it has no more cash, and cash has to be injected immediately as a CPR measure. This was made very clear at the dialogue session among Healthway, Gateway and SIAS. Gateway’s offer of S$60 million is the lifeline. However, it does not stop shareholders of Healthway considering the offer by Lippo,” Mr Gerald said.

Mr Gerald added that Gateway had no waiver to cross the 30 per cent ownership threshold without making a general offer. “Therefore, they had to offload S$15 million of the convertible notes. These facts are not understood by many shareholders. Gateway had no choice.”

As of yesterday, Gentle Care holds about 29.2 per cent of Healthway, below the 50 per cent threshold for its offer to turn unconditional. The closing date is on May 2.

Healthway, which runs Singapore’s largest private clinic chain, found itself in the spotlight last month after it failed to pay doctors and suppliers, while some of its clinics ran out of medication as it became mired in financial difficulties.

Business has returned to normal at the four Healthway clinics TODAY visited yesterday, including two in the Holland Village neighbourhood, one in Bedok and another in Kembangan. At least one doctor was present and serving patients at each of these clinics.

A Healthway doctor, who declined to be named, said the crisis subsided at the end of last month after the medical group accepted the S$70 million lifeline offered by Gateway.

The net proceeds from the first S$10 million convertible notes tranche allowed the clinic chain to pay arrears to its doctors, staff and suppliers before shareholders voted to approve the second S$60 million deal. Additional reporting by Kelly Ng

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