KUALA LUMPUR (May 22): Magma Group Bhd (KL:MAGMA), formerly known as Impiana Hotels Bhd, plans to undertake an issuance of redeemable convertible notes (RCNs) to raise up to RM100 million to repay borrowings and fund working capital.
According to a bourse filing on Tuesday, the notes, which will mature in 36 months with 2% interest per annum payable quarterly, will be privately placed to Advance Opportunities Fund VCC (AOF VCC) and Advance Opportunities Fund 1 (AOF 1).
Of the maximum proceeds to be raised from the note issuance, RM48 million is earmarked for the repayment of the hospitality group’s bank borrowings and RM43.69 million for working capital.
In November 2022, Magma had undertaken an up to RM150 million RCN exercise with AOF VCC and AOF 1, but only raised RM32.5 million from the notes. This was terminated on May 21 this year to make way for the latest proposed RCN exercise.
Meanwhile, a private placement exercise of up to 10% of its share base was completed in December 2023 and raised RM19.52 million.
That said, Magma noted that the funds raised from these two cash calls were insufficient to fulfil its funding requirements, namely repaying bank borrowings and funding working capital.
“This is especially since the company was not able to proceed with further drawdown of the previous RCN as the company has almost exhausted the approved maximum shares to be issued under the previous RCN,” the company added.
The latest proposed RM100 million worth of RCNs carry the option to be converted up to one billion ordinary shares at a conversion price for each share at 80% of the three-day average closing price per Magma share with a floor conversion price set at 10 sen per converted share.
For illustrative purposes, assuming full conversion, Magma’s largest shareholder and chairman Datuk Seri Lee Hock Seng’s 12.74% direct stake in the company would be diluted to 6.2%.
Kenanga IB has been appointed as principal adviser, lead arranger, manager and facility agent for the proposed notes issue.
Subject to requisite approval, the first sub-tranche of RCNs is expected to be available for issuance by the fourth quarter of 2024, followed by the subsequent tranches to be issued over the subsequent three years.
Shares in Magma ended unchanged at 25.5 sen, giving the company a market capitalisation of RM242 million.