Posted by: Financial Sith Lord | December 11, 2009

Experience: Bank Statements and Underwriting a Rights Issue for a PLC

From 1996 to 2004, I was privileged to be trusted by my clients. Some even trusted me so much that they placed a substantial amount of money under my name, in a Singapore-based Private Bank. The arrangement was that, I was to hold in trust of the principal sum, and I’m to benefit 50% of the interest gained from the deposits. So, on an average, the Private Bank was giving out approximately 6%p.a. at that point. Thus, assuming that the deposit value was US$ 1 million, the interest gains would be US$ 60,000. And I could help myself to 50% of that US$ 60,000 (US$ 30,000). Well, that was a lot of money for using my name!!. and the deposited amount was approximately 400-fold.. Throughout the arrangement period, I received regular statements from the Private Bank every quarterly and the arrangement went on for about 3 years, before we ceased it. On a good note, that is..

It was somewhere around that period, I was doing a corporate finance deal involving a Malaysian Second Board Public Listed Company, trying to execute a Rights Issue. This was a result of the Securities Commission’s new policy (back then!!) that Second Board companies are to raise their capital from a minimum of RM 14 million to RM 40 million. My client’s capital was only RM 24 million, thus such policy effected them. Their businesses were slowing down and they approached me for help.

So after re-structuring their business to look more profitable in the future, then came the sessions with the Investment Banker (Now, back then, not many Investment Bankers were around as many still adopted the word Merchant Bankers to their name). The due-diligence were duly conducted, and then, the IB’s verdict came in. They were keen to do the exercise provided that the PLC could provide them with a party that would Underwrite the entire RM 26 million shares that they were proposing to issue. Both the PLC’s Chairman and the CEO looked at me with a ‘Help Me!’ face..

I turned to the IB Directors and said “I can give that underwriting on a personal capacity!”.. At first, the IB Directors gave me a goat-smile. But that smile changed when I presented to them (after chasing everyone out from the conference room) copies of my Private Bank statements.. Their eyes almost popped out when they saw the figures. After all the necessary verification and authentication, they agreed to take me as the personal Underwriter for the exercise. No copies of the statement were given to them, and when asked, they said its sufficient for them to sight the proof of fund, and write a report to the SC and Bank Negara. That was all to it..

The exercise went on as planned, and luckily for me, the PLC’s Rights Issue was over-subscribed. Thank God!!.

The morale of the story: When you are up in the elite society, all you have to do is portray that you have money, and the banks will rush to give you money.. No questions asked. But when you’re categorized as a mid-income society, you’ll have to show the banks everything (even your underwear!!) just to prove to them that you’re earning that much.. Funny eh!!

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Categories