DRB-Hicom Bhd, which owns a 100% stake in PHB, told Bursa Malaysia that the latest proposed PHB redeemable convertible cumulative preference shares (RCCPS) to be subscribed by Minister of Finance Inc’s unit Govco Holdings Bhd would mature at the end of the 15th year of the date of issuance of the earlier RM1.25bil tranche.
In June this year, Govco had paid RM1.25bil in cash to subscribe to 1.25 billion new PHB RCCPS.
Among the conditions precedent in that initial subscription agreement was that loss-making PHB must have initiated and presented a restructuring/turnaround plan to a committee formed by the Government and led by Performance Management and Delivery Unit (Pemandu), consisting of Government appointees who will monitor the implementation of the national carmaker’s recovery plan.
Within a year from the date of the subscription agreement, or a later date that the parties may agree to, PHB must seek and identify a “strategic and renowned partner” which will assist in research and development so that it can become a competitive player in the international automotive industry (at present, about 90% of PHB’s total revenue was derived from Malaysia).
On the salient terms of the initial subscription agreement and the subscription agreement for the 250 million RCCPS signed on Monday, DRB-Hicom said they were substantially the same except for certain principal terms.
The tenures of the initial subscription RCCPS, comprising 300 million PHB RCCPS, 400 million PHB RCCPS and 550 million PHB RCCPS, are seven, 10 and 15 years after the date of issuance, respectively. Hence the principal amount of the debt would be repaid at the end of these periods.
The tenure of the latest RCCPS, meanwhile, is 15 years from the date of issuance of the initial subscription RCCPS, with its maturity date at the end of that 15th year.
“The maturity date and redemption period of the new subscription RCCPS were determined to coincide with the last maturity date and redemption period of the initial subscription RCCPS,” it said.
DRB-Hicom said the proceeds from the proposed RCCPS issuance would be used to settle outstanding balances payable to the PHB group’s creditors, vendors and/or suppliers, and for such other purpose as may be approved by the task force.
“As such, the said proceeds are expected to be used within 12 months from the date of the issuance of the new subscription RCCPS,” it added.
Assuming that the entire PHB RCCPS and the related dividend declared for the PHB RCCPS of RM724mil were converted, DRB-Hicom’s shareholdings in PHB will be diluted from 100% to about 17.65%.