This article first appeared in The Edge Financial Daily, on October 22, 2015.

KUALA LUMPUR: KNM Group Bhd has proposed a private placement to raise up to RM106.64 million, which will be used to repay borrowings, for working capital and to defray  expenses related to the exercise.

In a filing with Bursa Malaysia yesterday, KNM said the placement entails an issuance of up to 193.89 million shares, representing approximately 10% of the issued share capital of the group.

It said the issue price of the placement shares will be determined and announced at a later date after receiving the relevant approvals, and after taking into consideration the prevailing market conditions.

Still, the issue price should not be at a discount of more than 10% to the five-day volume weighted average price of KNM’s share price immediately prior to the price-fixing date, and its par value of the shares of 50 sen. 

Assuming KNM managed to raise RM106.64 million, the group said it will utilise RM51 million (47.82%) for repayment of borrowings, RM52.66 million (49.38%) for working capital, and the remainder for expenses related to the proposed placement.

“The group requires additional working capital to fund the newly secured projects and potential additional contracts to be secured in relation to the Pengerang Integrated Petroleum Complex project in Johor,” it said.

As at June 30, 2015 (2QFY15), KNM’s total borrowings stood at RM676.38 million, of which RM392.4 million were short-term loans and borrowings, with a gearing ratio of 0.29 times.

Subsequent to the placement share, the group expects to lower the gearing ratio to 0.26 times.

KNM expects the corporate exercise to be completed by the first quarter of 2016.