Zylog systems will be filing a revised plea with Foreign Investment Promotion Board (FIPB) to allow and approve the issuing of optional convertible notes (OCN) to the tune of C$10 million to the 34 creditors of Canandian company, Brainhunter. The Canadian company was acquired by Zylog in February this year for a consideration of 35 million Canadian dollars. As per the share purchase agreement (SPA), Zylog had to pay off 10 million Canadian dollar to the 34 odd creditors of Brainhunter.
As Zylog decided not to pay the dues in cash, it opted for the issuing of OCN of the incurred debt amount. Meanwhile, FIPB, during last September, had rejected Zylog’s OCN plan forcing the company to submit a revised plea, said executive director Srikanth. ?We will be shortly filing a revised application with FIPB seeking their clearance for the OCN issue,? he added.
OCN is a debt security that pays an annual interest in cash on a periodic basis to the note holder. When there is no possibility of paying the periodic interests in cash, the lending company or the OCN holders could go for the debt to equity conversion of the outstanding amount.
Srikanth said shares of Sthithi Insurance Services, a promoter group entity, has been pledging shares from time to time to meet various needs like funding the recent acquisition of Brainhunter. Sthithi is a 50-50 joint venture between two other promoters of Zylog?Ramanujam Sesharathnam and Venkatraman Sudarshan. The promoter duos Sesharathnam and Sudharshan are MD and chairman of Zylog, respectively.
?Sthithi holds 14.85% stake in the company and is jointly floated by the promoters. In the recent 2 to 3 years the shares of Sthithi were pledged to raise funds to increase the promoters stake.