GOVERNMENT investment arm Khazanah Nasional Bhd has bought RM400mil of new stock in Renong Bhd to keep it afloat after failing to find other buyers.
Khazanah, which took over Renong’s parent United Engineers (M) Bhd (UEM) in a 2001 rescue, paid 50 sen each for 800 million shares in Renong, raising its stake to 49% from 31%, according to a KLSE filing. When the stock sale was announced in September, UEM had said it would buy the shares if other investors wouldn’t.
The government paid a premium in the deal, which helps Renong avoid the risk of being delisted from the KLSE. Renong shares, which have fallen some 57% in the past 12 months, closed at 39.5 sen yesterday, up 0.5 sen from Wednesday.
“They needed to ensure that no restrictions were imposed on Renong shares,” said Walter Lo, who helps manage RM800mil at OSK-UOB Unit Trust Management Bhd. “The government had no choice.”
The infrastructure group has said it needs the cash to shore up shareholders’ capital, which risks being wiped out as financing costs create losses. The government ousted former chairman Tan Sri Halim Saad in October last year after he ran up US$5bil in debt that the company was not able to support.
If Renong had depleted its capital, stock exchange rules would put it at risk of trading restrictions or delisting of its shares.
Renong’s management had tried last year to sell assets to pare debt and focus on property development, but its plans fell through after a stock market slump cut the value of its holdings.
The money raised from the share sale will help redeem RM4.2bil in 9.4% bonds, the interest payments on which contributed to Renong’s RM70mil loss for the three months to Sept 30, 2002. – Bloomberg
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