The RCCPS has a cumulative annual preferential dividend rate of four per cent. Correspondingly, Proton need to seek and identify a strategic and renowned partner who will assist in research and development to become a competitive player in automotive industry at the international level within a year.
KUCHING: The Minister of Finance Inc (MOF) will pump RM1.25 billion into Proton Holdings Bhd by subscribing to 1.25 billion units of new redeemable convertible cumulative preference shares (RCCPS) issued by the national automaker to raise RM1.25 billion cash.
“Proton group plays a crucial role in the national automotive industry where there are about 12,000 workers directly under the group, while approximately 50,000 are employed under the various vendor companies.
“In cognisance of this, the government agreed to subscribe to Proton’s RCCPS to provide financial support to Proton.
“This will also help rebuild the vendors and suppliers’ confidence in Proton,” said DRB-Hicom Bhd, which wholly owns the national carmaker, in the announcement to Bursa Malaysia.
To note, the announcement yesterday revealed Proton’s proposal of an issuance of 1.25 billion new RCCPS to GOVCO Holdings Bhd.
According to the research arm of Public Investment Bank Bhd (Public Research), the proceeds will likely be used to settle the outstanding balances payable to Proton’s Group’s creditors, vendors and suppliers.
“We are positive on this as we believe it can help to regularise the cash flow of Proton in during a challenging operating environment at its auto segment and accelerate the turnaround process at Proton,” it said.
The RCCPS has a cumulative annual preferential dividend rate of four per cent. Correspondingly, Proton need to seek and identify a strategic and renowned partner who will assist in research and development to become a competitive player in automotive industry at the international level within a year.
As at March 2015, Proton has a total borrowing of circa RM1.7 billion, which accounted for 24 per cent of DRB-Hicom’s total debt. The proposed issuance will reduce DRB-Hicom’s FY16 net gearing, it said.
“We are positive on this as we believe it can help to regularise the cash flow of Proton during a challenging operating environment at its automotive segment and accelerate the turnaround plans at Proton.
“The RCCPS is expected to yield at four per cent, which is fair in our opinion, as current cost of debt for the Group is ranging from four per cent to seven per cent.
“On the assumption that GOVCO converts the entire 1.25 billion RCCPS and dividend declared of RM574 million into new PHB shares at the end of the tenure, DRB’s shareholdings in Proton is expected to be diluted from 100 per cent to roughly 20.72 per cent.”
The RCCPS have a par value of one sen each and premium of 99 sen each at an issue price of RM1 each. The preference shares have a dividend of four per cent per annum on a cumulative basis.
The conversion ratio is at one unit of Proton’s RCCPS to 1.152 units of Proton’s shares.
The tenure for the RCCPS is up to 15 years after the issuance date.