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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:  C
Market Flag:  N
Classification: 

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

HOMEX - Melbourne                                                     

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Key steps in the proposed DSW restructure 
(subject to GRI and DSW shareholder approvals)

1. Preliminary DSW Refinancing Proposals:

* GRI acquires 1 million DSW secured convertible notes held by
Richard Shirley for A$180,000, and 3 million new GRI shares.

* GRI undertakes to convert its $4.25 million DSW c0
onvertible notes
(at 15-cents) on or before 30 June 2000-upon being satisfied that
no other major undisclosed legal or financial obligation exists
against DSW. These notes will be interest-free until 30 June 2000.

* Decile 10 converts its $2 million secured convertible notes into
DSW shares (at a 15-cents conversion price) - in consideration for
which GRI will issue 1.2 million GRI shares to Decile 10.

* GRI, Decile 10 and GEG convert their other outstanding loans and
inter0
est owing (at 11-cents per share) into DSW shares. A number of
existing DSW creditors (including Directors & staff) will convert
debt on the same basis.

* GRI will also provide a secured loan facility up to $300,000 to DSW
for its working capital needs (subject to DSW providing satisfactory
security). Any short-term funding provided by GRI will be offset
against the available cash proceeds.

* DSW issues 3,333,333 new DSW shares to Richard Shirley in exchange
for cancellatio0
n of his remaining DSW Convertible Notes and Options.

* DSW issues 28,333,334 new DSW shares to GRI.

2. Disposal of DSW Assets and Management Changes:

* GRI acquires from DSW the online trading platform, DEEPSky Trader,
and associated data and directory synchronisation products, Easy
Connect Module and SynchronIT assets and activities (excluding the
DEEPSky Retail products and messaging products) for $2 million cash -
with specified amounts to satisfy the existing known de0
bts, including
the ANZ Bank debt. The book value of these assets is $1,858,000.

* A number of employees currently working in these activities will
transfer to GRI; this includes Mr Geoff Renner as Chief Operating
Officer.

* Upon the successful conclusion of these transactions, Mr Peter
Williams will retire from the DSW Board. Norman Taralrud-Bay and
Geoff Renner will remain as Directors, and a further three
non-executive Directors will be invited to join the Board.

Impact 0
on Existing DSW shareholders:

At the conclusion of the proposed transactions, DSW would remove
approximately $14.2 million of secured debt from the balance sheet
and the sale of assets would remove $1.9 million of assets. In
addition, ongoing overheads will be substantially reduced following
the proposed transfer of activities associated with the assets being
sold.

The issued capital of the Company would increase from 130 million
shares to 219.49 million shares.

The net ef0
fect represents a significant lowering in the financial
risk of the Company and reduces the risk of failure. It would allow
the Company to focus on commercialisation of the new Oracle-based
DeepSky Retail merchandising software product and seek a suitable
complementary acquisition. However the proposal also removes from the
Company the upside potential of the DeepSky Trader product and the
associated products being sold.

On balance, your Board believes the proposal increases0
 the ability of
the Company to be an active participant in the e-commerce market.

Elements of the proposed restructure will be subject to DSW
shareholder approval. A Notice of Meeting will be lodged at the ASX
and sent to shareholders shortly that will contain the proposed
resolutions for approval, together with an Independent Expert's
report.

If the requisite shareholder approvals are given then completion is
expected early in January 2000. 

Reasons for Recommending the P0
roposed Restructure:

The Board believes that DSW is unable to raise any additional equity
without an immediate and significant reduction of debt. Further, the
cost of servicing the current debt levels is unsustainable for the
Company at its current stage of development. The ongoing lack of
financial resources is constraining the commercialisation of a number
of promising technologies developed by the Company and threatens the
continuing financial viability of the Company.

D0
espite the increasing urgency of the Company's financial position,
your Board has been unsuccessful in negotiating any other viable
funding alternative.

Under this proposal, DSW's largest stakeholder, GRI, is facilitating
the capitalisation of the $11 million DSW secured Convertible Notes
and outstanding interest at a substantial premium to the recent DSW
share price. In addition, GRI is prepared to acquire selected DSW
assets and activities for sufficient cash to substantia0
lly settle the
Company's remaining outstanding debts and will also provide a
$300,000 secured working capital facility.

The proposed restructuring will see DSW substantially debt-free and
able to raise capital to fund the remaining products, including the
exciting Deepsky Retail retail-merchandising product, and any future
complementary acquisitions.

GRI will emerge as the largest single DSW shareholder and is
committed to identifying suitable growth opportunities for this
0
Company.


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