PETALING JAYA: Shareholders of UMW Oil & Gas Corp Bhd (UMW-OG) have been advised to support the proposed exemption for Permodalan Nasional Bhd (PNB) from undertaking a mandatory offer following the group’s planned RM1.8bil rights issue.
In an independent advice circular, Mercury Securities said voting against the proposed exemption would result in the group not being able to undertake the fund-raising exercise, as the two were inter-conditional.
“Accordingly, the part repayment of bank borrowings and refinancing exercise will also not materialise,” it said in the circular.
Mercury Securities said it was of the opinion that the proposed exemption was “fair and reasonable”, and recommended that shareholders voted in favour of the ordinary resolution during the EGM on Aug 25.
In June, PNB had pledged to take up its full entitlement under the proposed rights issue with warrants.
The country’s biggest fund-management company also gave its undertaking to acquire the excess rights shares not taken up by other entitled UMW-OG shareholders.
The proposed exemption will relieve the major shareholder from the obligation to undertake a mandatory offer.
Mercury Securities noted that as at March 31, 2017, UMW-OG’s total borrowings stood at about RM4bil, of which about RM1.51bil was short-term debts due for repayment within one year.
UMW-OG plans to undertake the rights issue to reduce its reliance on debt financing.
“The proposed rights issue with warrants is the most appropriate means of raising funds for the group, after considering the existing lenders’ requirements, rationale of the recapitalisation exercise, intended utilisation of the proceeds and benefits of the rights issue to all shareholders of UMW-OG,” it said.
The rights issue was first announced in January as part of a larger plan that would see its parent company, UMW Holdings Bhd , exiting the oil and gas business, which had been dragging its profits down.