MRCB seeks to raise up to RM2.86bil through rights issue

Malaysia 2017 SEA Games fencing team, Natasha Ezzra Abu Bakar after press conference at National Sports Council (NSC) Bukit Jalil. AZMAN GHANI / The Star

KUALA LUMPUR: Malaysian Resources Corp Bhd (MRCB), which requires financing for its various development projects in the Klang Valley such as the Kuala Lumpur Sports City privatisation, is seeking to raise up to RM2.86bil through a proposed rights issue.

In a filing with Bursa Malaysia, the company announced a proposed renounceable rights issue of up to 2.86 million new ordinary MRCB shares together with free detachable warrants.

This is on the basis of one rights share for every existing MRCB share held and one free warrant for every five rights shares subscribed. This means that MRCB’s share capital would double and earnings per share would be diluted accordingly.

MRCB’s major shareholders Employees Provident Fund and Gapurna Sdn Bhd, which hold 33.55% and 16.78% of its voting shares respectively, have given their irrevocable undertakings to subscribe in full for their entitlements.

MRCB has also proposed that these shareholders and persons acting in concert with them be exempted from the obligation to make a mandatory offer arising from the application for excess rights shares.

MRCB said the issue price would be decided later, but it gave an indicative price of RM1 per rights share, which means that the gross proceeds would range from RM2.17bil to RM2.86bil. (MRCB shares closed down 1 sen at RM1.74 on Thursday, with 11.98 million shares changing hands.)

At least a third of the proceeds (RM975mil) will be earmarked as advances to MRCB’s 85%-owned indirect subsidiary Rakan Juang Sdn Bhd to finance the privatisation project to refurbish and upgrade the facilities at the National Sports Complex in Bukit Jalil, Kuala Lumpur.

Phase 1 of the development (Project 1) is expected to complete construction by July, while the construction for the next phase will begin on a date to be mutually agreed by the Government and Rakan Juang.

MRCB, whose group borrowings as at end of last year totalled RM2.94bil, plans to set aside RM826.32mil for paring down its borrowings.

This is expected to save MRCB about RM46.69mil in annual gross interest based on the group’s weighted average effective interest rate for its borrowings of about 5.65% per annum for the 2016 financial year.

MRCB is also allocating between RM233.04mil (under the minimum proceeds scenario) and RM916.90mil (maximum scenario) for other property development activities and/or construction projects.

Projects identified for funding include KL Sentral: Lot F, which would include two office towers and a tower of hotel-cum-serviced apartments with a gross development value (GDV) of RM2.98bil, and a 79-storey serviced apartment and hotel along Jalan Kia Peng, Kuala Lumpur, with a GDV of RM1.57bil.

At a press briefing on Thursday, MRCB chief financial officer Ann Wan Tee pointed out that the proceeds would not be used for any projects related to Bandar Malaysia.

In January, MRCB inked a new memorandum of understanding to jointly develop the integrated transportation hub terminal on 60 acres at Bandar Malaysia with Wondrous Vista Development Bhd and Bandar Malaysia Sdn Bhd.

In an earlier-signed MoU, IWH CREC Sdn Bhd had been a partner in the project.

The proposed rights issue is expected to be completed in the third quarter of this year.