HKEx: 2012

investor

Announcements

Sunshine Oilsands Ltd. is committed to providing our investors and the public with timely and accurate information regarding our business and operating activies.

April 1, 2020

CONNECTED TRANSACTION (1) ISSUE OF CONVERTIBLE BONDS TO CONNECTED PERSON UNDER SPECIFIC MANDATE; AND (2) APPOINTMENT OF INDEPENDENT FINANCIAL ADVISER

Hong Kong (April 1, 2020) and Calgary, Alberta (April 1, 2020) - The Board of Directors (the “Board”) of Sunshine Oilsands Ltd. (the “Corporation” or “Sunshine”) (HKEX: 2012) wishes to announce the following:

THE SUBSCRIPTION

The Board is pleased to announce that on April 1, 2020 (Hong Kong Time), the Corporation and the Subscriber, being a wholly owned company by Mr. Sun, the Chairman, Executive Director and Substantial Shareholder of the Corporation entered into the Subscription Agreement, pursuant to which, the Corporation has conditionally agreed to issue and the Subscriber has conditionally agreed to subscribe for the fixed rate convertible bonds to be issued by the Corporation in an aggregate principal amount of HKD $72,000,000.

Completion is subject to the fulfillment or waiver of the condition precedent set out in the Subscription Agreement. Detailed terms of the Subscription Agreement and the CB are set out in the paragraphs headed “THE SUBSCRIPTION AGREEMENT” and “THE PRINCIPAL TERMS OF THE CB”, respectively.

The issue price for the CB shall be HK$72,000,000 (being 100% of the principal amount of the CB). Based on the initial Conversion Price of HK$0.632 per Share, a maximum of 113,924,051 new Shares will be allotted and issued upon the full exercise of the CB, representing (i) approximately 88.93% of the existing issued share capital of the Corporation as at the date of this announcement; and (ii) approximately 47.07% of the allotment and issued share capital of the Corporation as enlarged by the issuance of the Conversion Shares (assuming there was no repurchase of Shares or issuance of other new Shares).

No listing of the CB will be sought on the Stock Exchange or any other stock exchanges. The Corporation will apply to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Conversion Shares.

IMPLICATIONS UNDER THE LISTING RULES

The Subscriber is a company wholly owned by Mr. Sun, being the Chairman, Executive Director and Substantial Shareholder of the Corporation, and is therefore, an associate of the connected person of the Corporation under Chapter 14A of the Listing Rules. The Subscription constitutes a non-exempt connected transaction for the Company under Chapter 14A of the Listing Rules and is subject to the announcement, reporting and Independent Shareholders’ approval requirements pursuant to the Listing Rules.

Mr. Sun, through his ownership in the Subscriber, is deemed to be interested in the Subscription, has abstained from voting at the Board meeting held to approve the Subscription.

The issuance of the Subscription Shares will also be subject to, amongst other things, the approval of the Independent Shareholders for the granting of the Specific Mandate at the SGM in accordance with the requirements of the Listing Rules.

INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISER

The Independent Board Committee, comprising all independent non-executive Directors who have no direct or indirect interest in the Subscription, the Specific Mandate and the transactions contemplated thereunder, namely Messrs. David Yi He, Guangzhong Xing and Alfa Li, have been formed to advise the Independent Shareholders on the Subscription, the Specific Mandate and the transactions contemplated thereunder.

With the approval of the Independent Board Committee, the Independent Financial Adviser has been appointed to advise the Independent Board Committee and the Independent Shareholders in respect of the Subscription, the Specific Mandate and the transactions contemplated thereunder.

SGM

The SGM will be convened and held for the purposes of considering and, if thought fit, approving the Subscription, the Specific Mandate and the transactions contemplated thereunder. The Subscriber and his associates who were interested in the Subscription Agreement and the Specific Mandate shall abstain from voting at the SGM in respect of all necessary resolutions approving the Subscription Agreement, the Specific Mandate and the transactions contemplated thereunder to be proposed at the SGM. The voting in respect of the Subscription, the Specific Mandate and the transaction contemplated thereunder at the SGM will be conducted by way of a poll.

A circular containing, among other things, (i) details of the Subscription, the Specific Mandate and the transactions contemplated thereunder; (ii) the recommendations of the Independent Board Committee to the Independent Shareholders; (iii) the letter of advice from the Independent Financial Adviser to the Independent Board Committee in relation to the Subscription, the Specific Mandate and the transactions contemplated thereunder; and (iv) a notice convening the SGM, will be despatched to the Shareholders within 15 business days of the date of this announcement.

The Subscription is subject to the fulfillment (or waiver, if applicable) of a number of conditions precedent set out under the section headed “The Subscription — Conditions of the Subscription” in this announcement, including approval at the SGM by the Independent Shareholders of the Subscription, the Specific Mandate and the transactions contemplated thereunder. As such, the Subscription may or may not proceed.

Shareholders and potential investors of the Corporation are advised to exercise caution when dealing in the Shares. Persons who are in doubt as to the action they should take should consult their stockbroker, licensed securities dealer or registered institution in securities, bank manager, solicitor, professional accountant or other professional advisers.

INTRODUCTION

the Corporation and the Subscriber, being a wholly owned company by Mr. Sun, the Chairman, Executive Director and Substantial Shareholder of the Corporation, entered into the Subscription Agreement, pursuant to which, the Corporation has conditionally agreed to issue and the Subscriber has conditionally agreed to subscribe for the fixed rate convertible bonds to be issued by the Corporation in an aggregate principal amount of HKD $72,000,000.

THE SUBSCRIPTION AGREEMENT

Date

April 1, 2020 (Hong Kong Time)

Parties

(i) the Corporation as issuer; and

(ii) the Subscriber

As at the date of this announcement, Mr. Sun, being the Chairman, Executive Director and Substantial Shareholder of the Corporation, together with his controlled companies, are interested in 36,308,540 Shares in aggregate, representing about 28.03% of the issued Shares of the Corporation as at the date of this announcement.

PRINCIPAL TERMS OF THE CB

The terms of the CB have been negotiated on an arm’s length basis, principal terms of which are summarized as follows:

Issuer	:	Sunshine Oilsands Limited
Principal Amount	:	HK$ 72,000,000
Term	:	2 years
Maturity Date	:	March 31, 2022
Denomination	:	The CB are issued in denomination of HK$ 1,000,000 each
Interest	:	The CB shall bear an interest rate of 8% per annum on the outstanding principal amount thereof from the Issue Date, payable by the Corporation at the Maturity Date
Conversion Price	:	HK$0.632 per Share (Conversion price is set at the higher of :- the closing price on execution date of the Subscription Agreement; and the average closing price per Share as quoted on the Stock Exchange for the last five consecutive trading days prior to execution date of the Subscription Agreement)
Conversion	:	The CB holder has the rights to convert any outstanding principal of the CB into the Shares during the period from the date of six months after the date of the Subscription Agreement until the Maturity Date, subject to the Corporation’s written approval. Given that, the Corporation shall not allot and issue Shares to the CB holder if upon the exercise of the Conversion Rights (i) the CB holder and parties acting in concert aggregated together with existing Shares held shall be interested (whether directly or indirectly) in 29.90% or more of the consequential enlarged issued share capital of the Corporation unless the CB holder has obtained a whitewash waiver from the SFC; (ii) any other percentage as may from time to time be specified in the Takeovers Code as being the level of triggering a mandatory general offer unless the CB holder has obtained a whitewash waiver from the SFC; or (iii) the Corporation shall fail to maintain a 25% public float.
Listing	:	The CB will not be listed on the Stock Exchange or any other stock exchanges. An application will be made to the Stock Exchange for the listing of, and permission to deal in, the Conversion Shares
Ranking	:	The Conversion Shares, when issued and fully paid, will rank pari passu among themselves and with all existing Shares presently in issue and at the time of allotment and issue of the Conversion Shares and in particular shall rank in full for all dividends and other distributions declared made or paid hereafter.

CONDITION PRECEDENT OF THE SUBSCRIPTION

Completion of the CB is conditional upon:

as required by the Listing Rules, the passing of all necessary resolutions by the Independent Shareholders at the SGM approving the Subscription and the granting of the Specific Mandate to allot and issue the Conversion Shares to the Subscriber;
the Listing Committee granting or agreeing to grant (subject to allotment) and not having withdrawn or revoked the approval of listing of and permission to deal in all the Conversion Shares which may fall to be allotted and issued upon the exercise of the Conversion Right; and
all actions by or in respect of or filings with, consents or approvals from any governmental or regulatory authority or other third parties required to permit the consummation of the transactions contemplated by the Subscription Agreement having been taken, made or obtained and all other relevant regulatory requirements having been complied with by the Corporation.

COMPLETION OF THE SUBSCRIPTION

Completion shall take place (unless otherwise agreed) on or before June 15[, 2020 following satisfaction of the condition precedent set out above.

The Corporation and the Subscriber shall use their respective best endeavor to procure the fulfilment of the conditions set out above on or June 15, 2020. If the above conditions areot fulfilled by 5:00 p.m. on June 15, 2020 (or such other date as agreed between the Corporation and the Subscriber in writing), the Subscription Agreement shall forthwith cease and terminate and neither the Corporatin nor the Subscriber shall have any claim against each other, save for any antecedent breach.

As at the date of this announcement, none of the condition precedent set out above have been fulfilled.

CONVERSION PRICE

The initial Conversion Price of HK$0.632 per Conversion Share represents:

approximately 26.4% premium to the closing price of HK$0.50 per Share as quoted on the Stock Exchange on April 1, 2020 (being the last trading day immediately prior to signing the Subscription Agreement); and
equivalent to the average closing price of HK$0.632 per Share as quoted on the Stock Exchange for the last five consecutive trading days up to and including March 31, 2020.

Mandates for the issue of the Conversion Shares

The Conversion Shares will be allotted and issued pursuant to the Specific Mandate to be sought from the Independent Shareholders at the SGM.

REASONS FOR AND BENEFITS OF ISSUANCE OF THE CONVERTIBLE BONDS

The Corporation is focused on the development of its significant holdings of oil sands leases in the Athabasca oil sands region.

Due to the drastic drop in crude oil prices, the Corporation's operating income and cash flow have fallen sharply. Coupled with the outbreak and widespread of COVID-19 virus all around the world, obstructed economic activity has led to a severe decline in demand for oil, which further adversely affects the financing opportunities of the Corporation. On the other hand, in addition to daily operating costs, the Corporation also needs to repay some of its debts. The management has continuously tried various alternatives during the past few months, including debt financing or equity financing (such as placements) through banks or financial institutions, but failed to succeed due to the adverse market conditions.

After arms’ length negotiation and careful consideration, in order to meet the urgent funding needs, the Corporation discussed and came up with a proposal with the Chairman Kwok Ping Sun, being the Chairman, Executive Director and Substantial Shareholder of the Corporation, whereby the Corporation will issue CB to Chairman Sun on terms set out above.

The Directors (including the independent non-executive Directors) consider that the terms and conditions of the Subscription Agreement and the Term of the CB were arrived at after arm’s length negotiations between the Corporation and the Subscriber, are on normal commercial terms, fair and reasonable and are in the interests of the Corporation and the Shareholders as a whole.

USE OF PROCEEDS

The estimated net proceeds from the Subscription, after deduction of expenses and fees payable by the Corporation are expected to be approximately HKD $ 71,500,000. The Corporation intends to apply the proceeds as follows:

approximately 80% for general working capital; and
the remaining 20% for repayment of debts.

CAPITAL RAISING ACTIVITIES OF THE CORPORATION DURING THE PAST 12 MONTHS

June 17, 2019	Private placement of convertible bonds under General Mandate	HK$81,406,545 (approximately USD 10,450,000 ⁽¹⁾)	For general working capital and capital expenditure for West Ells project	USD$ 10,450,000 ⁽¹⁾– 100% for general working capital and capital expenditure for West Ells project
July 11, 2019	Private placement of Common Shares under General Mandate	HK$2,003,750. (approximately CDN$135,640.57 ⁽²⁾)	For payment of director fees to certain Directors	CDN$ 335,602.95 ⁽²⁾ – there is no actual cash inflow into the Corporation as the issuance of shares was to offset the entire Connected Director fee
August 16, 2019	Private placement of Common Shares under General Mandate	HK$4,442,166.93 (approximately CDN$754,724.16)	For settlement of debt	HK$4,442,166.93 – there is no actual cash inflow into the Corporation as the issuance of shares was to settle the debt
August 22, 2019	Private placement of Common Shares under General Mandate	HK$7,088,040 (approximately CDN$1,200,000 ⁽³⁾ )	For settlement with trade creditor	CDN$1,200,000 ⁽³⁾ – there is no actual cash inflow into the Corporation as the issuance of shares was to settle the trade payable
October 17, 2019	Private placement of Common Shares under General Mandate	HK$2,376,846.73 (approximately CDN$402,875.52 ⁽⁴⁾ )	For settlement with trade creditor	CDN$402,875.52 ⁽⁴⁾ – there is no actual cash inflow into the Corporation as the issuance of shares was to settle the trade payable
December 16, 2019	Private placement of Common Shares under General Mandate	HK$2,705,733.57 (approximately CDN$456,998.40 ⁽⁵⁾ )	For settlement with trade creditor	CDN$456,998.40 ⁽⁵⁾ – there is no actual cash inflow into the Corporation as the issuance of shares was to settle the trade payable
March 5, 2020	Private placement of Common Shares under General Mandate	HK$1,890,330 (approximately CDN$323,670.19 ⁽⁶⁾ )	For settlement with trade creditor	CDN$323,670.19 ⁽⁶⁾ – there is no actual cash inflow into the Corporation as the issuance of shares was to settle the trade payable

Notes

Based on the exchange rate quoted by The Hong Kong and Shanghai Banking Cooperation Limited on June 16, 2019
Based on the Bank of Canada's nominal noon exchange rate (as at July 10, 2019) of CDN$1.00 =HK$5.9706.
Based on the Bank of Canada's nominal noon exchange rate (as at August 21, 2019) of CDN$1.00 =HK$5.9067.
Based on the Bank of Canada's nominal noon exchange rate (as at October 16, 2019) of CDN$1.00 =HK$5.8997.
Based on the Bank of Canada's nominal noon exchange rate (as at December 15, 2019) of CDN$1.00 =HK$5.9207.
Based on the Bank of Canada's nominal noon exchange rate (as at March 4, 2020) of CDN$1.00 =HK$5.8403.

Save as disclosed above, the Corporation has not conducted any funds raising activities in the past twelve months before the date of this announcement.

CHANGE IN SHAREHOLDING STRUCTURE

Assuming there is no change in the share capital of the Corporation from the date of this announcement up to the Completion, the shareholding structure of the Corporation (a) as at the date of this announcement and (b) immediately after the allotment and issue of the Conversion Shares upon full conversion of the CB at the Conversion Price is as follows:

	As at the date of this announcement		Immediately after the allotment and issuance of the Conversion Shares upon full conversion of the CB at the Conversion Price
Name of Shareholders	Number of Shares	Approx. % of Shares	Number of Shares	Approx. % of Shares
Kwok Ping Sun	36,308,540	28.03%	36,308,540	14.91%
The Subscriber	-		113,924,051	46.79%
Other public Shareholders (excluding the Subscriber)	93,246,090	71.97%	93,246,090	38.30%

		100.00%	243,478,681	100.00%
Total	129,554,630 ⁽¹⁾	100.00%	243,478,681 ⁽¹⁾	100.00%

Note:

The above figure does not include 990,347,263 new Shares (equivalent to approximately 19,979,685 new consolidated Shares after share consolidation) to be allotted and issued upon the full conversion of the CB pursuant to the Subscription Agreement per the announcement dated June 16, 2019, supplemented by the announcement dated June 17, 2019 and the announcement dated February 26, 2020.

IMPLICATIONS UNDER THE LISTING RULES

Mr. Sun, through his ownership in the Subscriber, is deemed to be interested in the Subscription, has abstained from voting at the Board meeting held to approve the Subscription.

The issuance of the Conversion Shares will also be subject to, amongst other things, the approval of the Independent Shareholders for the granting of the Specific Mandate at the SGM in accordance with the requirements of the Listing Rules.

POSSIBLE MANDATORY GENERAL OFFER

Both the Corporation and the Subscriber are fully aware that, upon conversion of the CB by the Subscriber from time to time, it may trigger Rule 26.1 of the Takeovers Code that require the Subscriber to make a mandatory general offer to the Shareholders for all issued Shares of the Corporation (not already owned or agreed to be acquired by it or any parties acting in concert with it). The Corporation will issue further announcement in this regard as and when appropriate.

INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISER

The Independent Board Committee, comprising all independent non-executive Directors who have no direct or indirect interest in the Subscription, the Specific Mandate and the transactions contemplated thereunder, namely Messrs. David Yi He, Guangzhong Xing and Alfa Li, has been formed to advise the Independent Shareholders on the Subscription, the Specific Mandate and the transactions contemplated thereunder.

SGM

The SGM will be convened and held for the purposes of considering and, if thought fit, approving the Subscription, the Specific Mandate and the transactions contemplated thereunder. The Subscriber, who is interested in the Subscription Agreement, the Specific Mandate and the transactions contemplated thereunder, shall abstain from voting at the SGM in respect of all necessary resolutions approving the Subscription Agreement, the Specific Mandate and the transactions contemplated thereunder. The voting in respect of the Subscription, the Specific Mandate and the transactions contemplated thereunder at the SGM will be conducted by way of a poll.

The Subscriber and its respective associates, i.e. Mr. Sun, shall abstain from voting on the resolutions approving the Subscription, the Specific Mandate and the transactions contemplated thereunder at the SGM. As at the date of this announcement, Mr. Sun is directly or indirectly interested in 36,308,540 Shares, representing approximately 28.03% of the issued share capital of the Corporation.

Save as disclosed above, to the best knowledge of the Directors, no other existing Shareholder has a material interest in the Subscription, the Specific Mandate and the transactions contemplated thereunder and therefore no Shareholder is required to abstain from voting in relation to the resolutions to approve the Subscription, the Specific Mandate and the transactions contemplated thereunder to be proposed at the SGM.

DEFINITIONS

In this announcement, unless the context otherwise requires, the following terms shall have the following meanings:


“acting in concert”		has the same meaning as ascribed to it under the Takeovers Code
“associate(s)”		has the same meaning as ascribed to it under the Takeovers Code, unless the contexts otherwise specify
“Board”		the board of Directors
“Business Day”		a day (except Saturday, and Sunday and public holiday) on which banks in Hong Kong are open for business
“CB” or “Convertible Bonds”		the fixed rate convertible bonds issued pursuant to the Subscription Agreement
“CDN$”		Canadian dollars, the lawful currency of Canada

“Completion”		completion of the issuance of the Subscription pursuant to the terms of the Subscription Agreement
“Completion Date”		subject to the fulfilment of the condition precedent set out in the Subscription Agreement, or the latest, June 15, 2020 or other date as the contracting parties to the Subscription Agreement agreed in writing
“connected person(s)”		Has the meanings as ascribed thereto under the Listing Rules
“Conversion Price”		HK$0.632 per Share, subject to adjustments from time to time under the terms and conditions of the Subscription Agreement
“Conversion Rights”		the rights attached to the CB to convert the whole or part thereof into Conversion Shares
“Conversion Share(s)”		A total of 113,924,051 new Share(s) to be allotted and issued by the Corporation upon full exercise of the Conversion Rights
“Director(s)”		the Directors of the Corporation
“Executive”		means the Executive Director of the Corporate Finance Division of the SFC or any delegate of the Executive Director
“Group”		the Corporation and its subsidiaries
“HK$”		Hong Kong dollars, the lawful currency of Hong Kong
“Hong Kong”		the Hong Kong Special Administrative Region of the People Republic of China
“independent third party(ies)”		independent third parties who is/are not connected person(s) of the Corporation and is/are independent of and not connected with the Corporation and its Directors, Chief Executives, and substantial shareholders of the Corporation or any of its subsidiaries or their respective associates

“Issuance”		the issue of CB to the Subscriber under the Subscription Agreement

“Issue Date		the date on which completion of the issue of and the subscription for the CB occurs pursuant to the Subscription Agreement
“Independent Board Committee”		an independent committee of the Board established by the Board, comprising all independent non-executive Directors, namely, Messrs. David Yi He, Guangzhong Xing and Alfa Li
“Independent Financial Adviser”		Donvex Capital Limited, a corporation licensed to carry out Type 6 (advising on corporate finance) regulated activities under the SFO, being the independent financial adviser appointed by the Independent Board Committee to advise the Independent Board Committee and the Independent Shareholders in respect of terms of the Subscription Agreement, the Specific Mandate and the transactions contemplated thereunder
“Independent Shareholders”		for the purpose of the Subscription, the Specific Mandate and the transactions contemplated thereunder, the Shareholders other than (i) the Subscriber and its associates (as defined under the Listing Rules) and; (ii) any other Shareholders who have a material interest in the Subscription, the Specific Mandate and the transactions contemplated thereunder
“Last Trading Day”		April 1, 2020, being the last trading day of the Shares immediately prior to the date of this announcement
“Listing Committee”		the listing sub-committee of the board of directors of the Stock Exchange
“Listing Rules”		the Rules Governing the Listing of Securities on the Stock Exchange
“Mr. Sun”		Mr. Kwok Ping Sun, being the Chairman, Executive Director and Substantial Shareholder (as defined under the Listing Rules) of the Corporation; and as at the date of hereof, together with his controlled companies, he is interested in 36,308,540 Shares of the Corporation, representing approximately 28.03% of the issued share capital of the Corporation
“PRC”		The People’s Republic of China, but (solely for the purpose of the Subscription Agreement) excluding Hong Kong and Macau Special Administrative Regions and Taiwan Regions
“SFC”		the Securities and Futures Commission of Hong Kong
“SFO”		the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
“Share(s)”		The Class “A” Common Voting Share(s) in the issued share capital of the Corporation
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