Delayed Disclosure Raises Questions on NZ Coastal Seafoods’ Funding Transparency
New Zealand Coastal Seafoods has detailed the terms of its recent $270,000 convertible note subscription following an ASX inquiry, confirming lender identities, conversion pricing, and compliance with disclosure rules.
- Convertible note subscription involves two lenders: Luke Mckensie and Tamari Gibbons
- Issue price set at $1.00 per note with 12% annual interest upon redemption
- Conversion price fixed at $0.006 per share (pre-consolidation basis)
- Maturity of notes is 12 months from subscription date with no security provided
- Company confirms compliance with ASX Listing Rules and shareholder approval requirements
Background and ASX Inquiry
New Zealand Coastal Seafoods Limited (ASX: NZS) has responded to an ASX Aware Letter issued on 7 January 2025, which sought clarification on the material terms of a convertible note subscription announced in the company’s 2024 annual report. The ASX’s inquiry focused on the specifics of the convertible note arrangement, the timing of disclosure, and compliance with continuous disclosure obligations under Listing Rule 3.1.
Details of the Convertible Note Subscription
NZS confirmed that the convertible note subscription involves two professional investors, Mr. Luke Mckensie and Ms. Tamari Gibbons, who committed a total of $270,000 before costs. Each convertible note was issued at $1.00, carrying an interest rate of 12% per annum payable upon redemption. The notes mature 12 months from the subscription date, with a conversion price set at $0.006 per share on a pre-consolidation basis.
Importantly, the company disclosed that no security was provided to the lenders under this arrangement, and shareholder approval will be required if the notes are converted into shares. NZS also stated there are no other material terms beyond those outlined.
Disclosure Timing and Compliance
The ASX questioned why the convertible note subscription was not announced immediately upon commitment, given the potential material impact on the company’s securities. NZS explained that the lenders required at least 28 days to make funds available, creating uncertainty around the timing of payment. Consequently, the company considered the information insufficiently definite to warrant immediate disclosure at that time.
NZS emphasized that this decision was unrelated to its cash position, revenue, or comprehensive loss as reported for the year ended 30 June 2024. The company only deemed the information sufficiently definite for disclosure once the lenders confirmed funds would be available in January 2025.
NZS confirmed it remains in compliance with the ASX Listing Rules, particularly Listing Rule 3.1, and that the responses to the ASX’s questions have been authorised by its Board of Directors.
Contextual Implications
This episode highlights the challenges smaller listed companies face in balancing timely disclosure with the practicalities of funding arrangements. The convertible note subscription provides NZS with a modest capital injection, which could support operational needs or strategic initiatives amid a reported comprehensive loss of $108,109 for the 2024 financial year.
Investors will be watching closely for shareholder approval outcomes and the eventual conversion of these notes, which could dilute existing shareholdings given the low conversion price. The company’s voluntary suspension from trading since December 2023 adds another layer of complexity, underscoring the importance of transparent communication as NZS navigates its capital structure.
Bottom Line?
NZ Coastal Seafoods’ convertible note terms are now clear, but the timing and impact of conversion remain key watchpoints for investors.
Questions in the middle?
- When will shareholder approval for the convertible note conversion be sought and granted?
- How will the conversion at $0.006 per share affect NZS’s capital structure and existing shareholders?
- What are the company’s plans to improve cash flow and profitability following this capital raise?