Monday 7 October 2013

Silver Bird: the White Knight and the "forgotten" clause

I have blogged a lot about Silver Bird in the past, some issues:

Silver linings in the Silver Bird cloud?
Taking away the silver linings that The Star saw in the timely (but otherwise horrific) announcements, and the fact that authorities (again) had not paid any heed to the many red flags, as observed by blogger "Where is Ze Moola".

Silverbird: I declare that the statements may be incorrect
About the poor director who had to make a declaration about the correctness of the financial statements, knowing they most likely were completely wrong (it later turned out they were indeed rubbish).

Silver Bird hammered by 300 million write-offs
Huge losses for a relatively small company.

Silver Bird
Shocking findings by the forensic audit, most likely indicating huge fraud by senior management.

Why is Aussie VC fund much too late with its announcements?
An Australian VC fund (CVC Limited) who announced its deposal of shares in Silver Bird almost one year too late.

However, in July finally some good news, a white knight in shining armour was helping poor Silver Bird out!

Of course, there is a price for everything, in this case a rather steep price:
  • The RPS (Redeemable Preference Shares) would convert into 160 Million Silver Bird shares, equivalent to 40% of the enlarged share base
  • Additional 320 million warrants would be issued
  • 10% of the share of profits if SBGB achieves a pre-tax profit of RM 5 million

But lo and behold, there is more. Only on October 1, 2013 the following announcement was made:

"... in the event that the exchange of the RPS with restructured SBGB shares together with free detachable warrants on the basis of RM1.00 of outstanding RPS (plus dividend) for ten (10) SBGB shares of RM0.10 each ( or such equivalent ratio if there is a change in the par value of ordinary shares of SBGB after the regularisation plan ) with twenty (20) free detachable warrants, is not approved by shareholders of the Company or the Scheme Creditors, the investors of the RPS, namely Suncsi Holdings Sdn Bhd and Covenant Equity Consulting Sdn Bhd  (“Investors”) shall have the option to require SBGB to purchase all the RPS at the cash price of RM2.50 per RPS, within sixty (60 days after the Investors deliver such notice of exercise to the Company....."

That makes things rather different, since the RPS were bought at RM 1.00, meaning the white knight would walk away with 150% profit, a cool RM 24 million, on top of their initial investment of RM 16 million.

It also puts the future decision by the shareholders of Silver Bird in a very different light, do they actually have a choice, how can they possibly fork out the RM 24 million in case they would not approve the restructuring scheme?

According to The Edge of October 7, 2013: "The condition was inadvertently omitted from the original announcement".

How many experts (auditors/accountants/lawyers etc.) had knowledge of this agreement, both from the side of Silver Bird, its major shareholders, the white knight, the regulators, etc.?

This is really a huge blunder, how could anybody "forget" to include this in the initial announcement to Bursa?

With all the above conditions in place, the white knight turned out to be not so white after all. Which is unfortunately often the case in restructuring schemes.

More bad news, the auditor of Silver Bird announced its intention to resign. Auditors resigning is another well known and large red flag, as if there were already not enough of them .....


  1. What SEGI and Masterskill got to do with Silver Bird?

  2. Nothing, but I grouped them together in one posting which I called "Silverbird, Masterskill, SEGi", that is why.