KNM proposes RM3.16b debt restructuring, sets creditors' meeting for Aug 11
The scheme – which involves both KNM and its wholly owned unit KNM Process Systems Sdn Bhd (KNMPS) – aims to restructure a combined RM3.16 billion in liabilities as of the June 30, 2023 cut-off date.
The Kuala Lumpur High Court has granted the company an order to hold the meeting and extended a restraining order until August 12 to shield the group from legal action by creditors while the restructuring process unfolds.
Under the proposed arrangement, creditors will be repaid through a combination of immediate cash proceeds and deferred instruments.
The bulk of the initial cash will be sourced from the proposed RM1.3 billion disposal of German-based Deutsche KNM GmbH to Japan's NGK Insulators Ltd.
KNM expects RM983.5 million in net proceeds from the sale after deducting transaction costs, escrow requirements and working capital needs.
Secured creditors of KNMPS are to be repaid in full in cash upon implementation of the scheme.
Unsecured creditors will receive approximately 80.94% of their admitted claims in cash, with the remaining 19.06% to be settled through the issuance of five-year zero-coupon redeemable unsecured loan stocks (RULS).
These bonds will not bear interest and will be repaid progressively over five years via a mix of escrowed funds, asset disposals, and internally generated cash.
KNM has classified creditors into three groups: secured, unsecured, and intercompany.
While secured and unsecured creditors are expected to receive settlements, intercompany balances will only be addressed after other classes are resolved.
Some of these balances may ultimately be waived, according to the scheme's terms.
The RULS will be listed on the Main Market of Bursa Malaysia under the Exempt Regime, which allows for over-the-counter transfers but not public trading.
Redemption will follow a semi-annual waterfall mechanism, using excess cash generated by KNMPS after meeting its six-month working capital needs.
Additional funding will come from the potential release of RM156.6 million held in escrow from the German asset sale, along with proposed disposals of other non-core assets in Italy, the UK and Thailand.
As part of its restructuring, KNM proposes that the liabilities under the holding company – amounting to RM1.23 billion – be substantially settled via KNMPS.
Only RM4.2 million in unsecured claims and RM10.8 million in intercompany dues will be directly addressed by KNMG under the scheme.
The proposed arrangement remains subject to the approval of creditors at the August 11 meeting, sanction by the High Court, Bursa Malaysia's clearance for the regularisation plan and bond listing, and shareholders' endorsement of both the restructuring and asset disposal.
The group fell into PN17 status in 2022 following severe liquidity challenges, operational delays and audit concerns.
It said a comprehensive regularisation plan is in the final stages of formulation and will incorporate both the scheme of arrangement and the German asset disposal.
The Court of Appeal is scheduled to hear KNM's appeal for a longer restraining order on September 18.
The company's current ad-interim order will remain in place until then, providing a temporary buffer from enforcement actions. –TMR
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