Sovereign scheme

Press, 20 September 1985, Page 19

Sovereign scheme

Major reconstruction proposals will be put to the shareholders of Sovereign Gold Mines, Ltd (in receivership), at the first annual meeting of the company in Greymouth next month. The annual report shows that central to the proposals is a resolution which will allow Sovereign to buy the capital of Westside Traders, Ltd, for SI.6M in shares and options, subject to a contract being made by the receivers with Sovereign. Essentially, this resolution means a back-door listing for Westside, the company which made a take-over offer of 5c an ordinary Sovereign share in July. The explanatory note to the resolution says that “this motion is the nub of the proposals to restructure the company and this pave the way for the termination of its receivership and for its future application for the lifting of the suspension of its shares with the New Zealand Stock Exchange.” Another motion central to the reconstruction proposals is to reduce the par value of the Sovereign ordinary shares from 25c to 5c a share. If this is not passed it means that five out of the six remaining motions in special business, including the acquisition of West side’s capital, will not be put. The explanatory notes state that the reduction in the par value of the shares “would allow the company to confi-

dently face its future without the handicap of the par value being grossly in excess of the asset backing value.” The motion would also give a realistic value to the shares and options to be issued to Westside — the asset backing of the shares from the March 31 balance-sheet is about 2c each. A motion will also be put to reduce the exercise price of the existing 6,493,500 unexercised Sovereign options from 25c to sc. The final exercise date is June 30, 1986. It is hoped that such a reduction will encourage holders to exercise their options and attract additional funds to the comP fflgh Court approval is also required for the motions on reaucing the par values of the ordinary shares and options. A motion will also be put that Messrs Stephen Smith (chairman of Sovereign), Raymond Smith, and Roy Anderson be elected as the only present directors of the company, and that they be given power to appoint a further two directors to the board. The explanatory notes state that the other three present directors of Sovereign, Messrs J. H. Bennett, K. C. Hunt, and P. A. Hyde-Harris, have given signed undertakings that they will resign as directors - conditional on motions on the par values and the issue of shares to Westside being passed — and that they will not seek reappointment.

The note also states that Messrs Bennett, Hunt, and Hvde-Harris have undertaken to' give their support to the three motions concerned. A name change from Sovereign to Prime-West Corporation, Ltd. will also be put to the meeting. The reason given for the proposed change is that it is considered desirable that the company face the future with a fresh image. The contract with the receivers also provides that Westside, subject to the motions being passed, will advance to Sovereign SIM (or whatever sum is required) in cash which, together with proceeds from the sale of surplus fixed assets made by the receivers after March 31, will discharge Sovereign's secured and unsecured liabilities. The discharges will terminate the receivership and satisfy all creditors. The advance by Westside will be for one year, carry an interest rate of 2 per cent above the 90-day non-bank billselling rate, and will be secured by a registered debenture. The chairman of Sovereign, Mr Smith, says that the future of the company is bound up in goldmining, furniture and appliance retailing, and in finance and servicing. “The two major inhibiting factors facing the company are addressed by the proposals in that they chart a course to the termination of the receivership and they hold the promise of improved financial strength."