MUMBAI: DQ Entertainment (International) has announced that its holding company and promoter DQ Entertainment (Mauritius) has executed the documents to raise funds up to US$50 million. The funds will be raised by way of semi or secured convertible bonds from OL Master, a private credit fund managed by OCP Asia (Hong Kong).

In an announcement made to the BSE, the company has said that the funds can be drawn down in two tranches, the first of which is for US$35 million and will be drawn down immediately and the second tranche of US$15 million can be drawn down at the option of the investor within 12 months thereof.

The net proceeds from the issue of the bonds will   be used to fund the development of more than 20 owned-IP and co-production project   currently in the pipeline for production over the next two years, for the repayment of certain debts amounting to approximately US$7.2 1 million (Rs 445.1 million) and for general  working capital  purpose.

DQ Entertainment chairman and CEO Tapaas Chakravarti said, “We are delighted to partner with OCP Asia and are confident that this association will help us to realise our mission for DQE.   The validation of our  business  model  by the high acumen  OCP team  further  strengthens our commitment  to  produce  and  distribute  world  class  content  across  territories and  grow  our audiences with high quality IP creation."

OCP  Asia  (Hong  Koug) co-founding  partner Teall   Edds added, "We   have  been impressed  with  DQE's exciting pipeline  and its capabilities in producing world class  content,  its ability  to work with broadcasters from around  the world in bringing ideas  to the screen  and  its 360-degree monetisation approach to generating  returns  on IP.  We look forward to our close partnership with DQE.”

It can be noted that the board of directors of DQE had been exploring various options to secure the necessary funding for the group’s pipeline projects, the bulk of which are children/family oriented animation series for TV and digital distribution. “This has included discussions with a number of investors and after considerable deliberation and effort, DQE has concluded that the issue of the bonds is the best option available to the group to secure the finance it needs and is in the best interests of shareholders  as a whole. The board believes there is an opportunity to grow DQE’s business through the development and exploitation of its own IP and the issue of the bonds provides the finance to capitalise on this,” the statement to the BSE reads.

DQE has a production order book worth approximately US$ 63 million (Rs 3,820 million) in terms of revenue to the group. Some of the projects currently in production include ‘Robin Hood’, ‘Peter Pan season 2’, ‘Lassie’, ‘Miles from Tomorrow  Land’, ‘Popples’ and  ‘Seven Dwarfs &  Me.’ Production of many new IPs such as ‘5 & IT’, ‘Yonagunis and Leo Galilei’ will  commence  soon. The company had recently also signed on a co-production project called ‘Pio the Chick’ with Rai, Italy and is engaged in discussions for more such projects.  

DQE's distribution and licensing division has concluded 24 deals in the current financial year. In addition, a number of broadcast deals for the group's IP, including Jungle Book, Peter Pan. Iron Man and Robin Hood, have been concluded with global broadcasters such as Rai Cinema (Italy), DEA (Italy), Viacom I8 (India) and  Univision (USA & Puerto Rico).  DQE expects to be able to grow its licening and merchandising revenue through its 360-degree monetisation strategy for all its existing and new IPs going forward.

Major Terms of the Bonds

The bonds carry a cash coupon rate of 6.5 per cent per annum payable semi-annually from the closing date up to the maturity date. The bonds will have a maturity period of five years from the closing date (the "Maturity Date”).

Outstanding bonds will be redeemed on the maturity date at  a redemption price which would yield an internal rate of  return  ("IRR”)  equal  to 15  per cent  per annum  (the 'Redemption Price’).   In addition, the bond holders can redeem the bond at the Redemption Price after a period of 36 months after the closing date.

The bonds will   be issued to the Investor and are freely transferrable, in whole or in part, to any person (with the holders of the bonds from time to time being collectively the "Bond holders'').

“The bond can be converted into ordinary shares of DQE Mauritius. The conversion of the full US $50 million of bonds would currently equate to 56.5 per cent of DQE Mauritius on a fully diluted basis,” said the statement.