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DSW`s ann: Major Elimination of Debt & Sale of Assets

Document date:  Thu 25 Nov 1999
Published:  Thu 25 Nov 1999 00:00:00
Document No:  155498
Document part:  B
Market Flag:  N
Classification: 

DEEPSKY WEBMARKET LIMITED                     1999-11-25  ASX-SIGNAL-G

HOMEX - Melbourne                                                     

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SUMMARY OF ANNOUNCEMENT

SUBJECT TO SHAREHOLDER APPROVAL

CAPITALISATION OF DEBTS

* The Directors of DeepSky WebMarket Ltd ("DSW") have concluded
agreements with major debt holders and shareholders for a refinancing
of the company. This refinancing will leave DSW substantially debt
free compared to the Septe0
mber 1999 balance sheet which shows secured
loans, Convertible Notes and accrued interest of approximately $14.2
million. 

* Greenchip Investments Limited ("GRI") has agreed to convert its 
outstanding loans and interest owing in excess of $750.000 into DSW 
shares at 11 cents per share. 

* GRI has agreed to convert $750,000 of its outstanding loans and 
interest owing into DSW shares at 11 cents per share on or before 30 
June 2000 upon being satisfied that no other major 0
undisclosed legal 
or financial obligation exists against DSW. These loans will be 
interest free until 30 June 2000 following approval of the 
transactions by shareholders.

* GRI has agreed to purchase 1 million Convertible Notes from Richard
Shirley for $180,000 and the issue of 3 million new GRI shares.

* GRI has further undertaken to convert its $4.25 million DSW
Convertible Notes at a price of $0.15 on or before 30 June 2000, upon
being satisfied that no other major un0
disclosed legal or financial
obligation exists against DSW. These notes will be interest free
until 30 June 2000 following approval of the transactions by
shareholders. 

* The Decile 10 Fund ("Decile 10") has also agreed to convert its $2 
million secured Convertible Notes, in consideration for which, GRI 
will issue 1.2 million GRI shares to Decile 10.

* Under the proposal, DSW will buy back the secured convertible notes
and immediately issue shares priced at $0.15 to the 0
Convertible Note
holders. 

* DSW will issue shares priced at $0.11 for any outstanding accrued 
interest and principal owed to secured debt holders. 

* Richard Shirley has agreed with DSW to surrender to DSW for
cancellation the remainder of his Convertible Notes and his 23.4
million options in return for the issue of 3.33 million new shares in
DSW.

* DSW will issue 28,333,334 new DSW shares to GRI. 

* Following this reconstruction GRI will be entitled to approximately 
40
7% of DSW's share capital.

SALE OF ASSETS

* DSW will sell to GRI for $2 million cash the business activities
and Intellectual Property in DeepSky Trader, Easy Connect Module and
SynchronIT, which together comprise our business-to-business e
Commerce suite of software and integration tools for eCommerce. 

* DSW will use part of this cash to repay in full the Fully Drawn 
Advance from the ANZ Bank and the remainder will be used for working 
capital.

FUTURE PROSPECTS

* DSW 0
will then be able to actively commercialize its major retail-
merchandising product, DeepSky Retail, which has had a successful
commercial history, despite limited historic resources. 

* DSW will have renewed commitment from its major shareholder GRI, 
which will in future focus on the business areas in which DSW has been
involved historically, and will continue to be a supportive 
shareholder by granting a $300,000 working capital facility to DSW. 

* With the prospect of a0
 "debt free" balance sheet, the Directors 
believe DSW will be able to raise further equity capital as necessary 
and will also actively pursue complementary acquisitions. 

* The Directors of DSW believe shareholders will appreciate this 
substantial improvement of the balance sheet, effectively completing 
the restructuring begun in early 1998, and the opportunity to move 
forward with the commercialisation of DeepSky Retail. 

* When completed, this reconstruction will rem0
ove approximately $14.2 
million of secured debt (92.7% of total liabilities at 30 September 
1999). 

* The sale of assets will remove $1,858,000 of assets (23.9% of the 
assets at 30 September). 

* and result in approximately 89,442,000 shares being issued based on 
completion by 1 January 2000. The total number of shares to be issued 
will vary slightly according to the number of days interest to actual 
completion. 

* Further details of complementary transactions by GRI0
 are also being 
announced today and shareholders are also referred to that 
announcement.

BACKGROUND 

In the 1998 Annual Report and subsequent releases the Directors 
emphasised the necessity for DSW to reduce its debt levels in order to
raise further funds for commercialisation of several promising 
technologies owned by DSW.

All subsequent attempts to raise further equity have produced a
precondition that DSW's Convertible debt and Bank debt should be
removed from the b0
alance sheet. Accordingly the Directors have sought
to balance negotiations with potential new equity investors with the
existing major shareholders and Convertible Debt holders and the
Bank.

DSW has been severely impacted by the fallout from the ongoing
high-profile dispute between the fund manager, Greenchip Funds
Management Pty Ltd, and Greenchip Emerging Growth Limited, Decile 10
and various Industry Superannuation Funds that had previously
invested in DSW. The previous 0
joint policy of active co-investment
had broken down with the decision by the latter parties to
effectively withhold further funding to DSW. 

In the process of these attempted negotiations it became evident that 
the Convertible Note holders were prepared to convert their Notes 
under certain conditions and the Bank would be supportive of 
restructuring proposals.

GRI is currently the largest shareholder in DSW with 27.8% of the
issued shares and is also the largest lender/0
creditor to DSW with
over $5.3 million of secured/unsecured loans/advances/interest owing.

MORE TO FOLLOW

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