KUALA LUMPUR (June 9): Permodalan Nasional Bhd (PNB), the country’s largest fund-management company, has pledged to take up its full allocation under UMW Oil & Gas Corp Bhd's (UMW-OG) proposed rights issue with warrants.

It also agreed to acquire any unallocated shares should other shareholders of UMW-OG choose not to subscribe.

On May 4, UMW-OG had proposed to raise up to RM1.82 billion through a rights issue of up to 6.05 billion new shares, together with up to 1.51 billion free warrants at an issue price of 30 sen per rights share.

The rights issue will be done on the basis of 14 rights shares for every five existing shares, while the warrants will be issued on the basis of one warrant for every four rights shares subscribed.

In a filing with Bursa Malaysia today, UMW-OG said it has accepted an undertaking and subscription letter from PNB to provide its irrevocable undertaking to the rights issue.

"In the event PNB is unable to subscribe for all of its entitlement and/or apply for all the remaining excess rights shares as a result of the collective shareholding of PNB, Amanah Saham Bumiputera and the funds in UMW-OG exceeding 65% upon completion of the exercise, PNB will additionally subscribe for up to 4.85 billion new Islamic redeemable convertible preference shares (RCPS-i) together with up to 1.21 billion free warrants at the subscription price," said UMW-OG. The warrants will be issued on the basis of one warrant for every four RCPS-i subscribed.

"This is to ensure that UMW-OG will be able to raise the intended gross proceeds of RM1.82 billion," it added.

The rights issue undertaking expires on Dec 31, 2017.

The proposed exercise came after its three-way merger with Icon Offshore Bhd and Orkim Sdn Bhd failed. Icon’s major shareholder Ekuiti Nasional Bhd terminated the deal after considering the significant capital requirements of UMW-OG, which was much bigger than originally intended.

Despite the failed merger, UMW-OG's 55.73%-owned parent UMW Holdings Bhd has proceeded with its divestment of the ailing oil and gas unit, which will result in PNB holding a 44.5% stake in the company, with the Employees Provident Fund holding another 12%.

Out of the total gross proceeds from the rights issue, UMW-OG plans to use RM1.5 billion to repay bank borrowings, RM310 million for working capital and the rest for expenses of the corporate exercise.

Subsequent to the repayment of bank borrowings, UMW-OG's gearing is expected to be reduced to 0.56 times from 1.81 times as at Dec 31 last year.

UMW-OG shares closed one sen or 1.91% at 51.5 sen today, with 520,100 shares done, giving it a market capitalisation of RM1.11 billion.