KNM proposes private placement of shares

by **Cals** Wed 07 May 2014, 22:54

Business & Markets 2014

Written by Charles Yong of theedgemalaysia.com

Wednesday, 07 May 2014 10:12

KUALA LUMPUR: KNM Group Bhd is proposing a private placement of up to 146.7 million shares — equivalent to 10% of its issued and paid-up share capital — to independent third party investor(s) yet to be identified.

In an announcement to Bursa Malaysia yesterday, the company said the issue price, which will be determined at a later date, would not be more than 10% lower than the five-day weighted average market price of KNM shares immediately preceding the price fixing date.

There could be several price fixing dates as the placement is expected to be implemented in tranches within six months after the receipt of all relevant approvals.

Shareholder approval was obtained at the last annual general meeting in June 2013, authorising the board to issue new KNM shares not exceeding 10% of the company’s issued and paid-up share capital.

Based on an indicative price of 80 sen per placement share, KNM said it expects to raise gross proceeds amounting to RM117.34 million from the proposed private placement. About RM59.89 million or 51% of the indicative proceeds will be used as working capital within six months of placement, RM55 million or 46.9% for repayment of borrowings within three months of placement, and the remaining RM2.45 million for expenses related to the placement.

About RM51 million or 85% of the sum allocated for working capital will be used to pay for procurement of materials and to pay subcontractors for fabrication works and other professional services. The remaining RM8.89 million will be used for operating overheads.

KNM’s borrowings as at yesterday stood at RM947 million. The private placement will reduce borrowings to RM892 million, lowering its gearing ratio from 0.46 to 0.41.

The group’s debt ballooned following its 2008 acquisition of German engineering and manufacturing supplier Borsig, a 170-year-old company as large as KNM, for €350 million (RM1.7 billion then). The year before the acquisition, KNM’s borrowings stood at RM265.9 million.

Nonetheless, its borrowings have fallen off gradually from its 2008 level of RM1.43 billion. Its gearing ratio too has eased down to 0.46 from 0.79 in 2008.

The proposed private placement follows last month’s approval by shareholders for an employees’ share option scheme that could offer shares up to 15% of KNM’s issued and paid-up share capital at any point of time during the scheme’s existence.

In addition to its 1.47 billion shares, KNM also has 488.9 million outstanding warrants.

The private placement is expected to have a positive net effect on the group’s earnings for the financial year ending Dec 31, 2014 and future financial years, the company said.

This article first appeared in The Edge Financial Daily, on May 7, 2014.