Friday 29 Mar 2024
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This article first appeared in The Edge Financial Daily on October 26, 2018

KUALA LUMPUR: Under a securitisation exercise to streamline group assets and achieve a more efficient capital structure, Paramount Corp Bhd has proposed to dispose of three of its tertiary education campuses to a special purpose vehicle for a combination of cash amounting to RM420 million and new cumulative redeemable non-convertible preference shares in the vehicle.

The proposed sale of the campuses to Dynamic Gates Sdn Bhd (DGSB) — the vehicle established for the exercise — also entails a subsequent leaseback of the properties.

In a filing with Bursa Malaysia, Paramount said its wholly-owned subsidiaries KDU University College (PG) Sdn Bhd (KDUPG) and KDU University College Sdn Bhd (KDUUC) have entered into conditional sale and purchase agreements for the sale and subsequent leaseback of the properties with DGSB.

KDUPG will sell its Jalan Anson Campus Properties and Batu Kawan Campus Properties, both in Penang, for RM50 million and RM120 million respectively, while KDUUC will dispose of Utropolis Glenmarie Campus Properties in Selangor for RM250 million.

The original investment cost for the three properties was RM377.64 million.

The cash proceeds portion from the disposals amounting to RM294 million is intended to be utilised mainly to refinance borrowings (RM191.5 million), while RM100 million will be used for the partial redemption of private debt securities (PDS). The remaining RM2.5 million is for estimated expenses in relation to the exercises.

“The proposed exercises will be undertaken via a securitisation exercise and will streamline the assets owned by the group to achieve a more efficient capital structure by better matching the maturity profile of the borrowings to the lease period of the subject campus properties,” said Paramount.

Also, the partial redemption of PDS, from the proposed exercises, is expected to improve group cash flow as it will result in annual savings of approximately RM1.5 million based on the distribution rate of approximately 6.5% annually.

Moreover, it said the proposed exercises will enable the group to redirect the savings for working capital purposes, to rationalise its tertiary education assets and to facilitate future strategic divestments, if any.

Barring any unforeseen circumstances and subject to all relevant approvals being obtained, the proposed exercises is expected to be completed by the first quarter of 2019.

Paramount yesterday closed one sen or 0.5% lower to RM2, valuing the company at RM856.54 million. Over the past year, the counter has gained 23.84%.

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