KUALA LUMPUR: KNM Group Bhd has obtained credit facilities of up to €220 million (RM986 million) from a number of European banks.

In a filing with Bursa Malaysia yesterday, KNM said the facilities comprise a term loan of €60 million to fully discharge and settle its existing term loan for its acquisition of Borsig GmbH in 2008. They also include a bank guarantee of up to €160 million for general corporate and working capital requirements of the Borsig group and to refinance existing bilateral guarantee facilities.

The participating financial institutions are UniCredit Bank AG as arranger and UniCredit Luxembourg SA as agent. The credit facilities have a maximum tenure of five years.

The company said the facilities would “enhance the financial debt maturity profile of the group and improve its financial ratios as well as give rise to substantial savings in terms of interest expenses due from the credit facilities’ lower financing cost”.

In 2008, KNM acquired German engineering and manufacturing supplier Borsig for €350 million. The acquisition took place just as the global financial crisis began unravelling.

Although KNM’s revenue more than doubled in the year of the acquisition and its net profit leapt 80%, its profit margin dipped from 15.2% to 13.3% and its return on equity almost halved from 34% to 19%. Sales in Europe fell from RM1.49 billion in 2008 to a low of RM1.07 billion in 2010. It has not recovered until today.

KNM had in September last year proposed to list Borsig on the Singapore bourse in 2013, with an indicative valuation of between RM1.8 billion and RM1.9 billion. But analysts viewed the valuation as too high.

With the acquisition of Borsig, KNM’s total debt-to-equity ratio shot up from 54.4% to 80.4% in 2008. As at Sept 30, the ratio had fallen to 44.82%.  Borsig has been KNM’s cash cow throughout the crisis. The years following the acquisition saw a streak of profit depression in all its geographical segments; Europe alone had been consistently profitable. When KNM recorded its first loss as a public-listed company in 2011, the losses were from Asia and America.

Borsig’s listing plan has been delayed indefinitely. Analysts said the capital raised from the listing could be used for KNM’s RM2.3 billion renewable energy plant project in Peterborough, UK, which was also delayed due to funding problems.

This article first appeared in The Edge Financial Daily, on December 20, 2013.