KUALA LUMPUR (May 27): Sunway Bhd intends to raise up to RM1.1 billion via issuance of 1.11 billion units of irredeemable convertible preference shares (ICPS) to pare down borrowings and fund hospital expansion and property development expenditure.

In a bourse filing, the group announced that the ICPS will be issued at RM1 per share on the basis of one ICPS for every five existing ordinary shares held by shareholders at an entitlement date to be determined later.

These ICPS have a tenure of five years and can be converted for RM1 per share four years after the issue date.

The issue price and conversion price represent 35.9% and 31.5% to Sunway’s five-day volume-weighted average market price (VWAP) of RM1.56 and theoretical ex-rights price (TERP) RM1.46 respectively.

Under the minimum issuance scenario, RM980.28 million would be raised. In particular, RM600 million would be used to repay its debts, RM200 million for its hospital development and expansion programme and RM179.2 million for its property development and property investment programme, with the balance used to defray expenses associated with the exercise.

For the maximum issuance scenario, which would see RM1.11 billion raised – some RM732.5 million would be used to repay its debts, with the amounts used for its hospital, property plans not changing from the RM200 million and RM179.2 million respectively indicated under its minimum issuance scenario. The group's gearing ratio could go down to as low as 0.27 times if the maximum issuance scenario is achieved.

As of March 31, 2020, the group’s borrowing was at RM10.26 billion.

Sunway explained that the ICPS issuance is expected to result in an interest saving of RM22.4 million to RM27.4 million a year based on the average annual interest rate of 3.74%.

The group revealed that it would be using the fresh capital raised for Phase 4 of the Sunway Medical Centre, Sunway City and Sunway Medical Centre, Seberang Jaya, Penang.

Meanwhile for its property development segment, the proceeds would be used for the Sunway Big Box Hotel, Johor Sunway, Sunway Velocity (3C4), Kuala Lumpur,  and Serene(Plot 1), Selangor,Sunway Velocity 2 (Plot A), Kuala Lumpur, Sunway Monash-U Residence, Selangor and Dengkil warehouse, Selangor.

Following the full conversion of its ICPS and all warrants being exercised, Sunway’s share capital would expand to between 5.88 billion and 6.32 billion shares worth RM6.68 billion to RM7.59 billion respectively.