KUALA LUMPUR: IOI Properties Group Bhd plans to undertake a renounceable rights issue of 539.94 million new shares to raise up to RM1.025 billion, mainly for its investment properties at IOI Resort City in Putrajaya.

The amount raised, according to the company’s announcement yesterday, will cover the development costs of the completion of common infrastructure at IOI City Tower One, IOI City Tower Two and IOI City Hotel.

“Any shortfall or excess in funds allocated for capital expenditure will be funded from or used for investment opportunities,” it said, adding that the expected time frame for utilisation is about 18 months.

Besides, some RM200 million will be used for investment opportunities which may arise in the future while RM324.8 million will be allocated for working capital, which includes payment to suppliers and contractors for ongoing development projects, as well as for day-to-day operations.

The remaining amount is to be used as fees payable to the relevant authorities, printing cost of circular and abridged prospectus, advertisement and miscellaneous expenses.

“After due consideration of the various methods of fund raising, the board is of the opinion that raising funds by way of the proposed rights issue is most suitable for the company to raise the requisite funds,” IOI Properties said.

The rights issue will strengthen IOI Properties’ financial position with enhanced shareholders’ funds and reduced gearing level, it added.

IOI Properties is suggesting an issue price of RM1.90, representing a discount of about 28% to the theoretical ex-all price of RM2.64 based on a five-day volume weighted average market price of IOI Properties shares.

Based on the parameters, the proceeds to be raised from the proposed rights issue will amount to approximately RM1.025 billion, it said.

Meanwhile, IOI Properties has also proposed the establishment of an employees’ share option scheme of up to 10% of the issued and paid-up share capital.

Shares in IOI Properties fell seven sen to close at RM2.70 yesterday, giving it a market capitalisation of RM8.78 billion.

This article first appeared in The Edge Financial Daily, on November 11, 2014.