KUALA LUMPUR (May 18): Malaysian Resources Corp Bhd (MRCB) announced this evening that it has proposed a one-for-one renounceable rights issue to raise fresh cash from shareholders to pare down its borrowings and to finance the refurbishment of the national sports complex in Bukit Jalil here.
Speaking at a media briefing, the conglomerate’s chief financial officer Ann Wan Tee stressed that the proceeds will be used for its ongoing projects; and it has nothing to do with the Bandar Malaysia project.
“We want to make it very clear on the utilisation of the proceeds, as there is obviously a lot of speculation on Bandar Malaysia. We don’t want people to make an inaccurate assumption that we’re raising money to inject into Bandar Malaysia,” he said.
The cash call, which will be sweetened by free detachable warrants on a one-for-five basis, aims to raise between RM2.17 billion and RM2.86 billion.
The group’s two substantial shareholders — the Employees Provident Fund (EPF) and Gapurna Sdn Bhd — have given the undertaking to subscribe in full to their entitlements. The duo may apply for excess rights shares.
As at end 2016, MRCB’s total bank borrowings, which had an annual average interest rate of 5.6%, stood at RM2.94 billion. Meanwhile, the group had a cash balance of RM592.77 million.
Besides financing the refurbishment of the national sports complex in Bukit Jalil and paring down borrowings, the group will utilise the proceeds for developing new property projects as well as for general working capital.
In a filing with Bursa Malaysia, MRCB said it intends to issue up to 2.86 billion in rights shares together with up to 571.34 million free detachable warrants.
EPF currently owns a 33.55% stake in MRCB, while Gapurna — the private vehicle of MRCB’s group managing director Tan Sri Mohamad Salim Fateh Din — owns a 16.78% stake.
Meanwhile, Bank Kerjasama Rakyat Malaysia Bhd and pilgrim fund Lembaga Tabung Haji owns 7.92% and 8.17% respectively.
Both EPF and Gapurna are applying to the authorities for exemption from the obligation to undertake a mandatory offer arising from the application for excess rights shares under the proposed rights issue as well as the subsequent exercise of the rights warrants into new MRCB shares.
On the amounts to be raised, MRCB said it has earmarked some 45% or RM975 million, which would be paid to its 85%-controlled subsidiary Rukun Juang Sdn Bhd (RJSB), held via MRCB Land Sdn Bhd.
Rukun Juang on Oct 28, 2015 signed a privatisation with the government — youth and sports ministry and Syarikat Tanah dan Harta Sdn Bhd — to refurbish and upgrade the facilities at the national sports complex in Bukit Jalil.
“The proceeds to be raised from the proposed rights issue are intended to be advanced to RJSB to finance the privatisation of the national sports complex,” MRCB said.
At the same time, MRCB also said it will set aside some 38% or RM826.32 million to repay its borrowings to financial institutions that include Affin Bank Bhd, Affin Hwang Investment Bank Bhd, RHB Islamic Bank Bhd and Malaysia Building Society Bhd.
“The repayment of borrowings amounting to approximately RM826.32 million is expected to result in an annual gross interest savings of approximately RM46.69 million to the company under both the minimum scenario and maximum scenario,” MRCB added.
MRCB also said it plans to set aside between 11% or RM233.04 million and 32% or RM916.9 million from the proceeds to fund its property development and construction projects, which include Lot 94 in Jalan Kia Peng, Lot F in Kuala Lumpur Sentral, phase 2 of 9 Seputeh and Sentral Suites.
MRCB shares closed at RM1.74 yesterday, with a market capitalisation of RM3.79 billion.
This article first appeared in The Edge Financial Daily, on May 18, 2017.