PERNAS International Holdings Bhd is embarking on a complex scheme to streamline its hotel business and to partially restructure its outstanding debt of more than RM2.5bil.
Upon completion of the scheme in the final quarter this year, Pernas will emerge in an improved gearing position, with its consolidated external borrowings reduced to RM2bil.
Pernas unveiled details of the reorganisation in a statement late on Thursday night.
The PJ Hilton, Mutiara KL, Hilton Kuching, Hilton Batang Ai, Mutiara Johor Baru, Mutiara Taman Negara Resort, Mutiara Pedu Lake Resort and Pernas Hotel Management Sdn Bhd (the hotel management arm) will be injected into Pernas' 70%-owned subsidiary, Arena Target Sdn Bhd.
Upon completion of the restructuring exercise, Arena Target which owns the Istana Hotel, Pelangi Beach Resort Langkawi and the Mutiara Beach Resort Penang will become the flagship hotel and hospitality vehicle of the Pernas group, with 10 hotel properties and the management company that operates the Mutiara brand.
The exercise also involves the RM550mil redeemable cumulative convertible preferences shares (RCCPS) issued by Arena Target to government investment arm Khazanah Nasional Bhd.
A source close to Pernas said: Arena Target will issue shares, irredeemable convertible loan stock and redeemable convertible loan stock to Pernas and Khazanah, resulting in Pernas holding 74% of Arena Target, and Khazanah 26%.
He said the scheme essentially seeks to offer Khazanah additional value in the form of the other hotel properties of Pernas group, apart from fully settling the obligations related to the preference shares.
Pernas' latest restructuring proposal allows Khazanah to recover the value of its investment in the original three hotels via restructured interest in the enlarged Arena Target group, and with the potential to reap some cash proceeds in the event these hotel assets and companies are disposed of later.
The preference shares issued to Khazanah in 1998 entitled the government investment arm to convert it into near 100% equity in Arena Target, added the source.
The restructuring would also enable Khazanah to exercise, five years from now, its put option over RM100mil nominal value of Arena Target irredeemable convertible unsecured loan stocks.
An analyst with AmResearch said that with the revamp, Arena Target would certainly be an attractive target to interested foreign parties keen on hotel stocks.
For Pernas, the source said, the scheme effectively did away with its obligation to redeem RM550mil repayment due to Khazanah before accounting for dividends and redemption premium accruing.
Arena Target would provisionally allot to Khazanah 632.92 million new shares in Arena Target at par value. Upon subscription, Arena Target will be fully released and discharged from its obligations in respect of the RCCPS, Pernas said in the statement.
With the funding cost effectively reduced to loan stocks, Arena Target appeared well poised to post a turnaround in the near future, the source noted.
Pernas shares, suspended yesterday, closed 12.21% higher at 96.5 sen on Thursday, its highest since Jan 22 this year, on volume of 20.9 million shares, the heaviest since 1999.
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