KUALA LUMPUR (Dec 8): KNM Group Bhd’s share price dropped 10% in active trade early on Thursday (Dec 8), following the industrial process equipment maker defaulting on RM418 million credit facilities.
The stock, which opened flat from its previous closing price of five sen, fell 10% or half a sen to 4.5 sen in the first hour of trading.
As at 10.10am, the counter pared losses to climb back to five sen, valuing the group at RM183.8 million. Year-to-date, KNM’s share price is down 66.67%.
With 55.54 million shares transacted so far, it was the third most actively traded stock behind MQ Technology Bhd (124.3 million shares) and AHB Holdings Bhd (74.33 million shares).
On Wednesday (Dec 7), KNM announced it had defaulted on three credit facilities, two totalling US$23 million (RM101.4 million) and one of €68.5 million (RM316.2 million) on Dec 1, or about RM417.6 million in all.
In an Bursa Malaysia filing announcing the defaults by its wholly-owned subsidiaries, KNM said it is presently in close negotiation with the lenders, although the repayment date has not changed from the Nov 30 deadline, following a previous extension.
The Practice Note 17 (PN17) outfit said the events of default may trigger cross defaults in other existing financial facilities.
KNM had timed the repayment to be done upon its disposal of its key subsidiary Borsig GmbH for €220.8 million (RM1.03 billion), which also had a Nov 30 deadline. However, the Borsig deal did not materialise, as the relevant conditions precedent were not fulfilled.
It added that the event of default “may have an adverse impact” on its financing facilities, in the event that KNM’s respective financial institutions suspend their financing facilities, pending the resolution of the event of default.
On Dec 1, KNM announced its proposed €220.8 million sale of Borsig had fallen through, after KNM decided not to extend the deal’s long-stop date from the Nov 30 deadline.
This raises the question on how the company will meet its debt obligations. It has term loans amounting to US$23 million (RM106 million) and €68.5 million supposedly due at end-November, following a payment extension previously.
KNM first announced the proposed disposal of Borsig by its wholly-owned unit Deutsche KNM GmbH (DKNM) on May 24. DKNM and GPR Siebzigste Verwaltungsgesellschaft mbH had postponed the closing date of the disposal from Oct 31 to allow for additional time to fulfil the conditions precedent of the sale and purchase agreement.
KNM had proposed Borsig’s disposal with €206.55 million to be used to pare down the group’s debt, including €12.93 million in repayment of the cash upstream loan receivables to Borsig.
At end-September, KNM had total borrowings of RM1.21 billion, down from RM1.26 billion a quarter ago. Some RM1.07 billion are short-term borrowings. Cash balance stood at RM63.48 million.