KUALA LUMPUR: The proposed reverse takeover (RTO) of financially distressed IRM Group Bhd by Permintex Automotive Sdn Bhd seems to have hit a snag as one of the former’s creditors, Al Rajhi Banking & Investment Corp (M) Bhd, has asked for a full repayment of the RM7.24 million owed to it in three years, said a source.
IRM Group had on Oct 7 pleaded for either a 30% waiver on its debt or for the debt to be paid in seven equal annual instalments of RM1.03 million each, both of which Al Rajhi had rejected in a written reply to IRM Group the following day.
Instead, the Saudi bank wants an upfront payment of 60% or RM4.35 million, to be settled by June or July next year, with the balance RM2.9 million to be settled in three equal annual instalments of RM965,793, according to documents seen by The Edge Financial Daily.
“It has asked for a very high repayment, which has made the [RTO] deal shaky. The RTO may not come to reality,” the source told the daily last week.
IRM Group’s shares would be more expensive for Permintex’s shareholders if the latter decides to forge ahead with the RTO.
Al Rajhi’s stand might result in IRM Group being unable to finalise its regularisation plan before the Practice Note (PN) 17 deadline by Dec 19 this year.
The group’s investment bank, KAF Investment Bank Bhd, wants to have verbal commitment that the lending banks would accept the scheme proposed by IRM Group before the submission of the regularisation plan as failing to do so would invite questions from the regulator, in this case, the Securities Commission Malaysia.
“It’s not the norm to submit a scheme that has high chances of failure,” said the source. And that is not all.
“The bigger problem is IRM Group’s solar energy farm project in Perlis, for which Permintex has advanced more than RM17 million as of June 2014,” he revealed. The project is undertaken by IRM Group’s wholly-owned unit IRM Solar Sdn Bhd.
Should the RTO fail to materialise, Permintex would have the right of first refusal to acquire IRM Solar, but at a price to be agreed on by an independent consulting engineering company involved in the field of solar energy, according to a heads of agreement (HoA) inked by Permintex and IRM Group on Feb 11 this year.
The agreement had also stated that Permintex should, at its own discretion, advance to IRM Solar, the funds to complete the 5mw solar energy farm.
Permintex is involved in the manufacturing and sale of precision injection moulding parts for the automotive industry, including instrument panel, dashboard, bumper, and other medium and small automotive parts.
To recap, IRM Group lapsed into PN17 status on May 31 last year after a series of recurring losses and the fact that its shareholders’ equity on a consolidated basis was “50% or less of the issued and paid-up capital of the company” according to the group’s previous announcements to the local bourse.
For its full year ended Dec 31, 2013, IRM Group’s net loss widened to RM32.36 million, as compared with a net loss of RM16.69 million a year ago.
Revenue came in 92.27% lower at RM8.86 million from RM114.74 million a year ago, its financial statement dated Feb 28 this year showed.
In the HoA signed with Permintex, the latter was identified as a “potential white knight of IRM” to assist IRM Group with its solar project and at the same time, its listing status.
“While work on the solar project was ongoing, IRM Group’s cash flow position was strained mainly due to suppressed margin from its resins and compound businesses. These events have led to the financial institutions recalling all the facilities granted to IRM Group and its subsidiary companies,” the agreement read.
As at June 30, 2014, IRM Group’s short-term borrowings are at RM47.54 million and long-term borrowings at RM1.1 million. In its annual report 2013, released June 6 this year, bank borrowings outstanding was RM57.29 million.
Its counter closed unchanged at 9 sen last Friday, with a market capitalisation of RM11.7 million.
This article first appeared in The Edge Financial Daily, on October 20, 2014.