ELK-Desa establishes RM1b MTN programme to fund expansion

This article first appeared in The Edge Financial Daily, on July 16, 2019.
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KUALA LUMPUR: ELK-Desa Resources Bhd has announced its maiden medium term notes (MTN) programme of up to RM1 billion in nominal value to raise funds for the expansion of its used car hire purchase financing business.

The company said in a statement, the programme, with a tenure of 10 years, will be done via its special vehicle Premier Auto Assets Bhd.

The first tranche of senior MTN totalling RM105 million, comprising RM85 million of AAA-rated Class A MTN and RM20 million of AA3-rated Class B MTN, is slated to be issued on Friday.

The MTN were rated by RAM Rating Services Bhd.

ELK-Desa executive director and chief financial officer Teoh Seng Hee said the exercise is in line with the group’s capital management strategy of relying on borrowings to grow its hire purchase business in the near to medium term.

“ELK-Desa’s gearing ratio remained at a low and manageable level of 0.28 times as at March 31, 2019. This provides our group with the flexibility to leverage and tap into the debt capital market to raise funds.

“This MTN programme is also timely as hire purchase financing for the used car segment remains underserved, with demand far outstripping supply. ELK-Desa, having carved a niche as a reputable lender in this area, is well poised to drive further growth moving forward,” said Teoh.

Hong Leong Investment Bank Bhd is the mandated principal lead adviser, lead arranger, lead manager and facility agent of the MTN programme.

ELK-Desa’s share price rose six sen or 3.85% to close at RM1.62 yesterday, giving it a market capitalisation of RM480.29 million.