KUALA LUMPUR (Oct 6): The shareholders of KNM Group Bhd who are looking to take over the board of the financially-distressed oil and gas engineering group say they plan to repay the group’s RM1.2 billion debt owed to creditors in the next three to six months. 

“We have identified business partners of mine in Europe who are willing to provide a significant amount of long-term finance to replace the existing debt,” said German businessman Andreas Heeschen, a key figure among the shareholders looking to take over the group’s board.

He was talking about the group's plan at a press conference held ahead of KNM's extraordinary general meeting on Oct 16, which Heeschen's group requisitioned for in early September, for shareholders to deliberate on the proposed management takeover.

In turn, Heeschen said the prospective new management plans to undertake corporate exercises to fund capital expenditure for the group’s assets.

Overall, he said the debt repayment plan may consist of a combination of bridging loans, a special bond issuance, inter-government financing and other appropriate corporate exercises.

“We are looking to place the bonds in the European markets, around €100 million to €110 million worth.

“I’ve talked to investors that I have been working with in the bond market and asked them whether they would entertain such an exercise and I am confident we are able to raise equity,” he added.

His group claimed they have access to the required financing to repay creditors, and expressed confidence in being able to secure it in the coming three to six months.

They also did not dismiss the option of asking KNM's creditors to take a hair cut.
 
On this, Heeschen declined to provide further details, saying the new prospective management of KNM will be speaking more on its plans in coming months.

The aspiring board highlighted three assets in particular that it plans to “revitalise” — KNM’s crown jewel German-based machinery and equipment manufacturer Borsig GmBh; the yet-to-be-built waste-to-energy plant in the UK, Peterborough Green Energy Ltd; and the mothballed cassava to ethanol plant in Thailand, Impress Ethanol Ltd.

Borsig has been KNM’s core earnings generator, with net profits between RM112 million to RM141 million per year over the past three years.

Flavio Porro, a former executive director of KNM but is looking to return the group as part of the proposed new board of directors, stressed that the new board does not plan to sell Borsig, saying the asset has “far greater potential under the right leadership”.

But to maintain creditors’ confidence, Porro said the new board plans to keep the corporate exercises proposed by the current management in place, including their plan to list Borsig, "if the new management deems the plan to be a good deal".

When contacted by The Edge, KNM chief executive officer and managing director Ravindrasingham Balasingham said the group's creditors will not be willing to give the prospective new board three to six months to address the group’s debt.

“If the prospective new board comes in, creditors will act the very next day. The group will be liquidated or placed under receiver and manager. They will take Borsig and other assets, sell and walk away,” he said.

“In this situation, KNM shareholders will bear the losses,” he added.

Ravindrasingham reiterated that KNM’s creditors stand with the current board, as they have demonstrated by their cooperation over the past year.

“The current management is working with key creditors to insert a clause into the scheme of arrangement (SOA), which provides for a moratorium on all charges — including interest — for 12 months," he said.

Heeschen, with its 7.91% stake, is acting with other KNM shareholders who represent a 10.68% stake in the group to unseat the current nine-member board that includes KNM chairman Tunku Datuk Yaacob Khyra, who has a 9.44% indirect stake. Heeschen has proposed for Tunku Yaakob to be replaced by Johor princess Tunku Kamariah Aminah Maimunah lskandariah Sultan Iskandar

The others directors that Heeschen's group has proposed to be appointed are: former chairman of Magna Prima Bhd and Komakcorp Bhd Datuk Abd Ghani Yusof; Edwin Silvester Das, who currently serves as Jiankun International Bhd CEO; Datuk Zaidi Mat Isa @ Hashim, who is also SMTrack Bhd's executive director; and William H Van Vliet II, who is also CN Asia Corp Bhd's executive director.

Prior to the EGM on Oct 16, KNM’s current management is set to have a meeting with its creditors over its SOA on Oct 12. It is understood that the  bulk of the RM1.2 billion KNM owes its creditors came from Asian Development Bank's Credit Guarantee and Investment Facility, and Danos Ltd.