This article first appeared in The Edge Financial Daily on June 4, 2019

KUALA LUMPUR: Kumpulan Perangsang Selangor Bhd’s (KPS) unit has accepted an Islamic finance credit facility for up to RM150 million from RHB Islamic Bank Bhd to partially fund the acquisition of Toyoplas Manufacturing (Malaysia) Sdn Bhd (Toyoplas Malaysia).

In a bourse filing yesterday, the group said wholly-owned Perangsang Dinamik Sdn Bhd (PDSB) had accepted RHB Islamic Bank’s Commodity Murabahah Term Financing-I facility in order to finance up to 48.2% of the group’s acquisition of Toyoplas Malaysia from Toyoplas Consolidated Ltd.

PDSB is paying RM311.25 million for the entire equity interest in Toyoplas Malaysia.

To guarantee the facility, PDSB is to enter a master facility agreement with RHB Islamic Bank and ink a memorandum of charge over the shares in Toyoplas Malaysia.

PDSB will also have to assign shares in Toyoplas Malaysia, associated dividends from Toyoplas Malaysia shares and other Toyoplas Malaysia-related income to RHB Islamic Bank, while also having to open accounts in the bank.

In addition, KPS will provide a RM150 million corporate guarantee to RHB Islamic Bank for its subsidiary.

While not having any impact on KPS’ shareholdings, the credit facility is expected to raise KPS’ gearing to 0.53 times, from 0.4 times currently.

KPS said its gearing ratio of 0.4 times was due to the issuance of RM300 million in nominal value under its sukuk murabahah programme and the settlement of borrowings worth RM294 million with proceeds from the sukuk murabahah programme.

It has also settled RM163.1 million worth of debts using proceeds from its divestment of Syarikat Pengeluar Air Sungai Selangor Sdn Bhd through Syarikat Pengeluar Air Selangor Holdings Bhd (SPLASH). SPLASH is a 30%-owned associate company of KPS’s wholly-owned subsidiary Viable Chip (M) Sdn Bhd.

KPS shares closed 2.88% or three sen lower at RM1.01 yesterday, giving it a market capitalisation of RM542.76 million.