KUALA LUMPUR (May 8): YFG Bhd wants to raise RM100 million through the proposed issuance of redeemable convertible notes programme with a tenure of five years.
The amount to be raised is double of YFG’s market capitalisation of RM51.8 million, based on today’s closing of 8.5 sen.
In a filing to Bursa Malaysia, YFG (fundamental: 0.15; valuation: 0.3) said it has appointed Kenanga Investment Bank Bhd for the issuance that comprises of redeemable convertible commercial papers and/or redeemable convertible medium term notes (MTN).
The electrical and mechanical engineering services provider said it has entered into a conditional subscription agreement (Subscription Agreement) with Advance Opportunities Fund and Advance Capital Partners Pte Ltd today, for the proposed notes issue.
The proceeds raised will be utilised for repayment of bank borrowings (RM22 million), working capital RM70.5 million and defrayment of expenses related to the proposed notes issue, the company said.
It added that the MTN is to be issued in six tranches, subject to terms and conditions as set out in the subscription agreement.
According to the filing, the issuance size was RM10 million each for Tranches 1, 2 and 3, then RM20 million each for Tranches 4 and 5 and RM30 million for Tranche 6.
"The notes are convertible at the option of the holders of the notes, into new ordinary shares of two sen each in YFG after completion of the proposed reduction of the issued and paid-up share capital of YFG involving the cancellation of eight sen of the par value of every existing ordinary share of 10 sen each in YFG, as announced by the company on April 13," the filing said.
"At the conversion terms and are redeemable at the election of YFG and/or on the maturity date in cash, subject to the terms and conditions as set out in the Subscription Agreement," it added.
On rationale, YFG said it was the most appropriate avenue of raising funds, as it enabled the company to raise fresh capital in a cost-effective and expeditious manner.
"It also enabled the company to raise funds via the hybrid market, that i, between the debt market where gearing and security or rating may be an issue, and the equity market where current market conditions may not be conducive," it explained.
YFG added that the proposed issuance is in multiple tranches, which allowed the flexibility to drawdown when the need for funds arises.
(Notes: The Edge Research's fundamental score reflects a company's profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)