KUALA LUMPUR (Oct 30): The proposal by OSK Holdings Bhd to provide financial assistance of up to A$250 million to its Australian associate Yarra Park City Pty Ltd is fair and reasonable, says independent adviser Kenanga Investment Bank Bhd.
 
Yarra Park, 38.25%-owned by OSK, is developing a property project in Melbourne.
 
OSK has said the financial assistance could be in cash advances, corporate guarantees, undertakings, indemnities or collaterals for banking facilities.

Kenanga said the proposal is not detrimental to the minority shareholders of OSK, while recommending to approve it at the forthcoming extraordinary general meeting.
 
In a circular to the shareholders filed by OSK with Bursa Malaysia today, Kenanga said it is common in the property development industry for a holding company such as OSK to provide cash advances to its subsidiaries or associates to secure funds for the development of their respective property development projects.

“In addition, we also note that there are also risks associated with raising equity capital funds from investors other than Yarra Park shareholders, which include finding the right prospective partners and investors to invest in Yarra Park,” the investment bank said.

Such additional shareholders, the independent adviser said, may cause changes in strategic business direction of Yarra Park due to differences in objectives of the shareholders, as well as the risk of inability to reach an agreement with all the existing stakeholders in respect of the equity capital fund raising.

Furthermore, Kenanga said OSK’s proposal for financial aid will be in proportion to the shareholding of OSK or its subsidiaries in Yarra Park.

“Based on the above evaluations, we are of the view that the rationale for the proposed provision of financial assistance is fair and reasonable,” the filing added.

In April, OSK had roped in Employees’ Provident Fund (EPF) as its strategic partner to develop the large scale mixed-use development project in Melbourne.

Following the invitation from OSK, EPF via its wholly-owned Yarra Development Holdings (Australia) Sdn Bhd is now the second largest shareholder in Yarra Park, owning a 49% stake.

The project, code-named Melbourne Square, is worth a combined A$2.81 billion in gross development value, OSK siad. It will feature three residential towers, an office tower, a retail component and a hotel.

OSK said the first phase is scheduled to commence sometime in November and is expected to be completed towards end-2020.

Shares in OSK dropped one sen or 0.63% to close at RM1.57 today, for a market capitalisation of RM2.2 billion.