KUALA LUMPUR (Dec 27): Cash-strapped KNM Group Bhd, which announced a default on three credit facilities totalling RM417.6 million earlier this month, has triggered another default, this time on the principal repayment of US$3.4 million (RM15.04 million) — with an outstanding interest of US$16,104 — due to Bank of China (Malaysia) Bhd.
The default, via its wholly owned KNM Capital Labuan Ltd, occured on Dec 26, said KNM in a Bursa Malaysia filing on Tuesday (Dec 27).
It had originally planned to use part of the proceeds from the proposed disposal of Borsig GmbH to pay the instalment payments of the credit facilities that totalled US$8 million. But KNM announced on Dec 1 that the deal had been called off as the relevant conditions precedent had not been fulfilled, despite the longstop date for share sale and purchase agreement for the disposal being extended various times.
In its latest filing, KNM said it was notified by Bank of China about the arrears via a letter dated Dec 19, and was given seven days from the date of the letter to settle the arrears. "As of to date, while we are in close negotiation with the lender, the arrears are still outstanding," said KNM.
Nevertheless, KNM said the repayments will be dealt with/addressed under the group's proposed scheme of arrangement.
In the meantime, as per its previous announcement on Dec 16, it has obtained a restraining order from the court to restrain its creditors from taking actions against the group for three months, which will also allow KNM and Bank of China to negotiate and finalise the terms of the scheme of arrangement.
On the same day, KNM also announced its plan to list Borsig on the Main Board of the Singapore Exchange — with an expected market capitalisation of US$300 million, and a placement of 49% of its enlarged capital — and has appointed PrimePartners Corporate Finance Pte Ltd as manager, underwriter and placement agent for the proposed initial public offering.
As for the financial impact of the latest default, KNM acknowledged that it might have an adverse impact on the financing facilities of KNM and its subsidiaries (KNM Group) in the event that KNM Group's respective financial institutions suspend their financing facilities, pending the resolution of this default.
"In this respect, KNM would like to remind that the current businesses, in particular for overseas operations, and the actual general market conditions would be sufficient to ensure continuity should the financial institutions maintain their respective position. KNM shall endeavour to continue its other business operations notwithstanding this isolated event of default and will engage with the lenders and suppliers for their continuing support," KNM added.
On Tuesday's market close, KNM shares dipped one sen to end at five sen apiece, giving the group a market capitalisation of RM183.91 million.