Inaccuracies have appeared in print media reports on Healthway Medical. This week, we sat down with Healthway's President, Veronica Chan, and financial controller, Goh Lay Lan, to understand matters.

Healthway facade2.17Healthway is Singapore’s largest network of private medical centres and clinics offering services in primary healthcare, dental and specialist services.
Photo: Company
Healthway is raising S$70 million from a fund called Gateway, and issuing notes to it. Contrary to a media report, the interest is not payable in cash.

Instead, the principal and interest are intended to be converted into zero-coupon convertible notes within six months. 

"Zero coupon" equates to zero interest, which means Healthway pays no interest on the notes. Nor will it need to repay the principal in instalments.

The notes mature in five years, at which point the entire sum is repayable together with the redemption premium of 6% internal rate of return to Gateway  -- or the notes can be converted into equity of Healthway prior to the maturity date.

To exchange all S$70 million of the notes and accrued interest into zero-coupon convertible notes, Healthway will first have to seek shareholder approval at an EGM, which is expected to be held in April 2017.  

Shareholder support could be forthcoming since the conversion means Healthway pays no cash interest on the S$70 million notes.

If shareholder approval is not obtained, Healthway has to pay up to 16.5% interest a year on the S$70 million -- this is something which no shareholder in his right mind would want.

Gateway is set to release the entire S$70 million sum to Healthway on 9 March 2017. 

The annual interest rates of 12% for the first three months and 16.5% for the subsequent three months look onerous.

However, Healthway says they are still more favourable than the terms offered by other institutions and funds, including some which wanted to privatise Healthway at low valuations. 

Healthway says it has S$11.5
 million of loan borrowings outstanding, and is expected to repay all of them using the Gateway cash infusion.


China: 
In its FY2016 results statement on 24 Feb 2017, Healthway made an allowance for doubtful loan receivables of S$21.6 million from "Party B" which it named as Wei Yi Shi Ye Co. Ltd. 

The identity of Party B is not a secret and was first revealed by Healthway several years ago.

Wei Yi Shi Ye operates and owns medical and dental practices and a hospital in Shanghai. This is a business which Healthway acquired and appointed a PRC national as the shareholder since Healthway, as a foreign enterprise, could not own it outright.  

The PRC shareholder has no active role in the business while Healthway appointed a member of its own staff as the sole executive director to ensure the integrity of the operations. 

Healthway funded this PRC business -- which started in 2009 -- to the tune of S$36.6 million, accounting for it as a loan receivable.

Because of operating losses in that business (high rental and doctors' salaries, etc) Healthway made allowances for doubtful loan receivables in past years. This is a non-cash accounting treatment.

In 2015, Wei Yi Shi Ye became the target of a possible acquisition by a third party, and a letter of intent was signed.

Healthway envisaged that the sales proceeds would be utilised to settle the loan receivables due from 
Wei Yi Shi Ye.

The acquisition, however, did not happen.  
The balance loan receivable as at 31 Dec 2016 was S$21.6 million, which Healthway chose to make an allowance for in its entirety.

This is so that in future, there is no further need to impair. 

In fact, with the Chinese business reducing its losses substantially over the years, Healthway is hopeful it would break even this year.

As and when the PRC business returns to profitability, Healthway will be able to write back the loans receivable. And there may be real cashflow back to Healthway.

Healthway Medical Enterprises (HME)
 

Way back, around 2010, Healthway had started specialist services from scratch, hiring specialists, leasing shop space and buying equipment. 

The business (Healthway Medical Enterprises), with its high capex and fixed operating costs, needed large financial support. Healthway decided to sell it with an option to buy it back. 

In the meantime, it extended loans, which grew to about S$65.5 million, to HME

Healthway, in its 2016 financial statement, made an allowance of doubtful loan and other receivables of S$15.0 million from HME.

The allowance is mainly due to the challenging operating environment which resulted in an increase in operating costs and an overall underperformance of the HME’s clinics. 

Healthway is set to acquire HME next month (March 2017) for S$3.54 million. 

Healthway reckoned it would be able to recover about 75% of the outstanding loan and other receivables.

In fact, HME, which has reduced its losses to just about S$100,000 last year, could turn profitable in the near term.


You may also be interested in:


Comments  

#10 Small Shareholder 2017-08-13 13:05
Heard both President Veronica and FC Lay Lan were asked to go. Hurray for small shareholders like us!
+9 #9 Small Share Holder 2017-03-27 11:41
Now that HMC has got some breathing space with $10m interim funding from Gateway, will the regulatory authorities continue to investigate the suspicious loans that almost led HMC to bankruptcy? As a shareholder, I want the authorities to get to the bottom of this mess. HMC could easily have been another Swiber and Ezra. Worse still, HMC operates in the medical industry that is thriving, unlike the O&G sector. There really is no excuse whatsoever for HMC's deplorable financial performance. Directors and management must be held accountable.
+7 #8 Small Share Holder 2017-03-20 11:48
Agree with Manfred. Not only the Party B loans to the daughter of the biggest shareholder. What about the Party A loans to the former chairman of the company? What are the regulators doing to protect minority shareholders? They need to send a clear message.
+7 #7 Manfred 2017-03-19 14:57
A company in a sunrise industry that makes so much money in clinics operation and then lose them all through questionable loans to a related company essentially owned by the daughter of the biggest shareholder, is best handled by CPIB. It's strange that all these funny businesses can bypass The Stock Exchange regulators. It has bought so much pain and misery to so many people: doctors, staffs and all investors in this company.
+8 #6 Small shareholder 2017-03-13 06:59
Please interview Healthway's President, Veronica Chan, and financial controller, Goh Lay Lan, again for an explanation about why the company is going bankrupt in 2-3 weeks time. Why were shareholders not updated or warned earlier about the dire financial position of the company?
+5 #5 Small Shareholder 2017-03-12 14:38
Own self admit they are going bust?

http://infopub.sgx.com/Apps?A=COW_CorpAnnouncement_Content&B=AnnouncementLast3Months&F=A9DARE0CHZ3H7TVZ&H=637a4df9e138c1d12d7033de8a3d5b784ab6e015c6ec0e638aa149f676889f2a
+3 #4 Small Share Holder 2017-03-10 15:58
Saw on FB... Sunshine Clinic rejecting patients?

(PLS SHARE AROUND).........
I have went to a Clinic near my house On 08/03/2017 Name (Healthway Medical Clinic 475 Choa Chu Kang Ave 3 #02-03,Sunshine Place) I reach the clinic at 2055hrs as the doctor n the staff is still around,I told them im in high blood problem n told them the medication I took not helping on reducing my blood pressure n I told the doctor I have run out of medication n he just tell me sorry we r close. But the operating Hrs to 2130hrs n ask me go to a 24hrs clinic nearby I ask the doctor what if I got a stroke after I leave? he say he cant do anything as they are close.(Is this a Professional doctor should say to a patient? )Pls help Share around...
-4 #3 GroSay 2017-03-07 01:05
My sources say Wei Yi Shi Ye is not "owned" by Fan's daughter. She is not the "owner" but she is named as the exec director. Anyone can be an exec dir without being the owner.
+5 #2 Vanessa1977 2017-03-07 00:44
http://www.straitstimes.com/business/healthway-medical-faces-heat-over-contentious-loans
+5 #1 Small Share Holder 2017-03-06 18:02
The whole deal is hobson's choice... pay back at 16.5% interest p.a. or convert the whole loan (plus 6%) to shares and see a 90% share dilution.

Both sides look bad, just a matter of which is worse.

And why no mention about Wei Yi Shi Ye being owned by Fan Kow Hin's daughter? Truly independent?
 

We have 2737 guests and 3 members online

rss_2 NextInsight - Latest News