Apart from the main narrative which is basically gossipy to my mind, the report ought to carry some related matters that add to our understanding and knowledge. There were also some name confusion.
First off, there is a distinction between creditors and lenders. All lenders are creditors but not all creditors are lenders. Anyone who is owed money to is a creditor, such as utilities, suppliers, contractors, etc. Lenders advance money to someone, often with a formal lending agreement. Although technically not wrong that ST often refers Tembusu, Qualgro and ACE Spring as creditors, it would be more specific to call them lenders.
Reading along, one needs to back track for the names. Seems there are 3 companies - FTMS Holdings, FTMS, and FTMS Global Academy. So the Academy is the business vehicle, FTMS is the plaintiffs' vehicle that owns the Academy, and FTMS Holdings is the plaintiffs' ultimate holding company. The report confuses which is the borrowing entity. It mentions loans to FTMS but then also mentions $4m loan from Qualgro and $4.5m from Tembusu to FTMS Holdings. Perhaps both have taken on loans, but it's not clear here.
I bet Singaporean readers are piqued by the plaintiffs' claim of conspiracy by lenders and other directors to oust them from the company. These are Cinderella stories to me. What drew my curiosity is firstly, a person-of-interest here, and secondly, is there a violation of the Money Lenders Act.
ST did not provide this backdrop. Qualgro and ACE Spring are capital ventures, Tembusu Growth Fund III is an equity fund managed by Tembusu Partners. The co-chairman of Tembusu Partners is Lim Hwee Wah who owns the company with her husband. Lim Hwee Wah was once a PAP stalward. When I see names like this, my antenna beeps. Not that there is anything wrong with ex-politicians. But surely this is an interesting fact that ST could have mentioned, I think. Won't be surprised to find some Temasek money here. Again not necesarilly means there is something wrong. But it rouses curiosity.
The Singapore Money Lenders Act strictly forbids non-bank or financial institutions from lending with interest to others. From the ST report, it suggests the 3 lenders have breached the Money Lenders Act. This is the irresponsibility of state media not to mention or dig into it.
There are exceptions to the rule. Those friendly loans we take from friends is not a problem. Entities which have a vested interest in a borrower can lend the latter to beef up the business.
My simple research shows the 3 lenders had FTMS Global Academy as investee company in their portfolio. Under the circumstances, loans to FTMS Global Academy would not have been in breach of the Money Lenders Act.
The ST report mentions loans to FTMS and FTMS Holdings. Does this constitute a breach of lending law? I'm not quite sure how the court will interpret this. Perhaps the test could be whether the proceeds of loans to the holding company and ultimate holding company of the Academy was used solely in their investee company.
ACE Spring eventually dropped out of the claims against the plaintiffs and the company was not named a defendant in this case. ST did not explain why.
ST mentioned "March 28, 2017, the lenders transferred all their loan rights to Ace, a company incorporated in the British Virgin Islands." Here's another lack of quality reporting. This is puzzling to the layman. ST does not elaborate. What happened is private equity funds, venture capitalists and hedge fund managers normally gut failed and illiquid assets and transfer them to a Special Purpose Vehicle (SPV). There are several reasons. It protects their reputation of the companies as non-performing assets impact their ROI and asset values. These failed assets take years to restructure as liquidators try to regain as much value as possible. There are lots of tax issues which are better handled in a SPV. All these should have been mentioned to inform readers.
My simple research shows the 3 lenders had FTMS Global Academy as investee company in their portfolio. Under the circumstances, loans to FTMS Global Academy would not have been in breach of the Money Lenders Act.
The ST report mentions loans to FTMS and FTMS Holdings. Does this constitute a breach of lending law? I'm not quite sure how the court will interpret this. Perhaps the test could be whether the proceeds of loans to the holding company and ultimate holding company of the Academy was used solely in their investee company.
ACE Spring eventually dropped out of the claims against the plaintiffs and the company was not named a defendant in this case. ST did not explain why.
ST mentioned "March 28, 2017, the lenders transferred all their loan rights to Ace, a company incorporated in the British Virgin Islands." Here's another lack of quality reporting. This is puzzling to the layman. ST does not elaborate. What happened is private equity funds, venture capitalists and hedge fund managers normally gut failed and illiquid assets and transfer them to a Special Purpose Vehicle (SPV). There are several reasons. It protects their reputation of the companies as non-performing assets impact their ROI and asset values. These failed assets take years to restructure as liquidators try to regain as much value as possible. There are lots of tax issues which are better handled in a SPV. All these should have been mentioned to inform readers.
ST reports the Cinderella part of the story but missed out on the business perspective that should give readers a better understanding.
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2 comments:
Many large loans would require an exemption under the Money Lenders Act. The parties to the loan contract would have been advised by their lawyers to make an application and receive the requisite Exemption in writing from the relevant Authorities before the loan can be executed. This Exemption would be included as an addendum or referenced in the loan document.
Thanks for your valued feed back. I am sure you are right in that the necessary requirements for exemptions to the MAct must have been perfected. ST ought to explain as readers aren't educated.
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