China Wonder (AIM: CWO) has announced an agreement with Wonder Employees Capital Limited (WECL) to borrow £200,000 for three years at a 5% annual interest.
During the period of the loan, WECL has the right to convert the loan into ordinary shares in the company at 10 pence per share, compared to yesterday’s closing price of 8 pence. The loan has been used to fund China Wonder’s investment in electric bicycle maker Metroelectric announced in late December last year.
The agreement constitutes a related party transaction as China Wonder’s substantial shareholder Qingjie Zhao is a director and the sole shareholder of WECL.
After consulting with nominated adviser WH Ireland Limited, the directors concluded that the terms of the transaction were reasonable to the shareholders.
Shares in the company rallied 9.5% on the news.
Disclosure: The author holds no positions in the company