KUALA LUMPUR (Oct 9): The Finance Ministry has agreed to provide a government guarantee for the Armed Forces Fund Board (LTAT) to take out a RM2 billion loan to undertake the general offer it proposed to privatise its 68.01%-controlled Boustead Plantations Bhd (BPlant) at RM1.55 per share.
This was revealed by Defence Minister Datuk Seri Mohamad Hassan in Dewan Rakyat on Monday. LTAT is expected to fork out RM1.11 billion to acquire the remaining 716.66 million shares that are equivalent to a 31.99% stake in BPlant that it does not control.
“In accordance with the Cabinet’s decision, the Ministry of Finance has agreed to provide a government guarantee to LTAT to enable the fund to obtain a loan of RM2 billion from financial institutions to implement the general offer for BPlant,” said Mohamad, who is also the Rembau Member of Parliament.
Mohamad also reiterated that LTAT’s wholly-owned Boustead Holdings Bhd has various short-term debt obligations to meet. These include the repayment of RM159 million in revolving credit facilities as well as the redemption of RM607 million in perpetual sukuk by December this year, and the payment of RM1.65 billion in Islamic Medium-Term Notes (IMTNs) by September 2024, Mohamad said.
Before the year is out, Boustead, which was privatised by LTAT earlier this year, needs RM800 million to meet its debt obligations, Mohamad said last month.
According to him on Monday, Boustead group's total debts now amount to RM6.8 billion.
LTAT had originally proposed to, with Boustead, dispose of a 33% stake plus one share in BPLant to Kuala Lumpur Kepong Bhd, before jointly extending a mandatory general offer at RM1.55 per share or a total of RM1.11 billion to acquire the remaining 31.99% stake in BPlant that they do not own. This would have resulted in KLK controlling a 65% stake in the privatised BPlant, with LTAT holding the other 35%.
The 33% plus one share stake disposal would have seen LTAT and Boustead receive RM1.15 billion from KLK, which would have helped Boustead address its debt obligations.
But with KLK's offer off the table now, LTAT has to fork out the RM1.11 billion on its own to proceed with the general offer at the same price point. To fund this, it will have to take on more debt, for which the government will guarantee.
Not a bailout, but government guarantee
In a press conference in Dewan Rakyat on Monday, Mohamad took offence to MPs using the term “bailout” to describe the government's decision to guarantee LTAT’s RM2 billion loan.
“It is not a bailout, the government didn’t pay with cash. We need to proceed with the general offer and (meet Boustead's) immediate debt requirements,” he said, adding that the government guarantee would enable LTAT to secure new borrowings at a lower interest rate.
A bailout, he said, is only for a company that is insolvent. “LTAT is very strong, it has a lot of money,” he added.
KLK's proposed acquisition of the 33% stake plus one share in BPlant officially fell through on Oct 4, with the group saying that conditions precedent under the strategic collaboration agreement were not expected to be satisfied by the twice-extended deadline of Oct 6.
Speculation that the deal was off had hit BPlant shares a few days before KLK announced the deal was off, with BPlant slumping to as low as RM1.27 at the start of the month. LTAT's subsequent announcement that it would proceed with the privatisation of BPlant on its own had helped to shore up the falling shares.
BPlant shares closed one sen or 0.72% higher at RM1.40 on Monday, giving the group a market capitalisation of RM3.14 billion.
For more Parliament stories, click here.