KUALA LUMPUR: ECM Libra Financial Group Bhd has proposed to distribute RM320.1 million of what it terms excess cash to entitled shareholders, by way of a proposed share capital reduction and a proposed special dividend.

In a filing with Bursa Malaysia yesterday, ECM Libra (fundamental: 1.35; valuation: 1.65) said the proposed distribution exercise will be in the form of cash, or a combination of cash and distribution-in-specie of ordinary shares, and/or warrants of Eastern & Oriental Bhd (E&O).

The E&O securities are currently part of the portfolio of securities held under Libra Strategic Opportunity Fund (LSOF), which is held by ECM Libra.

ECM Libra said the distribution is in line with the objectives of the group’s capital management framework, which include returning cash in excess of its requirement to shareholders, after taking into consideration its level of operations, cash, business prospects, investment plans, as well as current and expected obligations.

It added that the proposals could provide an opportunity for it to redeploy excess assets to its shareholders, and to reorganise its share capital base to reflect its existing level of operations and asset base.

It assured shareholders that it intends to maintain its listing status subsequent to the cash disbursement, and continue with its existing core business of fund management through its wholly-owned subsidiary Libra Invest Bhd, and manage its private equity investments.

As mentioned, it plans to effect the distribution via a proposed share capital reduction of approximately RM234.74 million and a proposed special dividend of RM85.36 million.

It intends to fund the cash component of the proposed distribution through its existing cash reserves, cash raised from retirement of its loan assets, cash raised from redemption of its investments in unit trusts and the realisation of shares held.

“The remaining balance of the distribution will be in the form of E&O securities under the proposed dividend-in-specie. In the event all the E&O securities are fully realised [by LSOF] in the interim period, the proposed distribution will then be undertaken wholly in cash.”

Subject to the completion of the proposed distribution, ECM Libra will embark on a proposed share split involving the subdivision of ECM shares, based on a ratio to be determined later.

“Upon the completion of the proposed share split, the issued and paid-up share capital of ECM Libra is proposed to be consolidated into ordinary shares, with a par value of 50 sen each,” it said.

After the proposed corporate exercises, ECM Libra’s issued and paid-up capital is expected to be reduced to between 64.02 million (RM32.01 million) and 68.78 million shares (RM34.39 million), from 268.22 million shares (RM268.22 million) currently.

Barring unforeseen circumstances, ECM expects the proposals, which require the approval of its shareholders in an extraordinary general meeting to be convened, to be completed by the fourth quarter of the group’s financial year ending Jan 31, 2016.

It added that the proposals will result in, among others, the redemption of the group’s loan portfolio, which currently stands at approximately RM80 million.

“Upon completion of the proposals, ECM Libra will cease to earn any recurring interest income from loans or any gains from LSOF.”

ECM Libra was suspended from trading yesterday; it was last traded at RM1.05, with a market capitalisation of RM281.13 million. It will resume trading today.

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This article first appeared in The Edge Financial Daily, on June 2, 2015.