Friday 29 Mar 2024
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KUALA LUMPUR: 1Malaysia Development Bhd (1MDB)’s energy unit has been renamed Edra Global Energy Bhd in what appears to be a deliberate move to distance the unit from its controversial parent ahead of its multibillion ringgit listing.

It was originally supposed to be 1MDB Energy Group Bhd. The name change was submitted to the Companies Commission of Malaysia on Monday.

“The name change is simply good sense. This is a listing of energy assets that has nothing to do with whatever allegations and problems that have been associated with 1MDB at the group level. Why take that baggage with you to a listing?” noted one industry executive who is familiar with the group that has come under intense public scrutiny in the past few months.

This may also seem a prudent move as 1MDB is expected to sell off most of its stake in Edra Global to pay off its mounting debts. This will entail the group relinquishing some management control in the process.

Based on previous reports in The Edge weekly, 1MDB may retain as little as 20% equity post-listing, which is substantial but barely enough to be considered an associate company. At most, 1MDB is only expected to retain slightly over 30% in the soon-to-be listed company.

The size of the listing will also be huge, with an estimated 4.4 billion shares for sale that will raise upwards of RM9 billion. It is challenging for the local market to absorb an issuance of this size unless valuations and growth prospects are very attractive.

Earlier documents on the listing show a 48% allocation for institutional investors, 24% for investors determined by the Ministry of International Trade and Industry, and an 8% retail portion.

The listing will also be marketed in the United States, with roadshows to begin early next year.

The last thing promoters need with such a large issuance is the stream of less-than-positive news on 1MDB marring the listing.

1MDB has been criticised for accumulating over RM41.9 billion worth of debts within five years. A large portion of the money has been used to acquire assets at exorbitant prices.

The group seems to be struggling to manage its huge debts now, requiring an extension on some RM2 billion worth of debts last week.

“Edra” means powerful or wealthy and is an old name that is used across many cultures. Investors interested in what comes with the new name will have to wait for Edra Global’s draft prospectus.

 

This article first appeared in The Edge Financial Daily, on December 4, 2014.

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