SM Track plans RM120m debt notes, diversify into commercial air transport

KUALA LUMPUR: SMTrack Group Bhd has proposed to issue up to RM120mil in debt notes and to diversify its business, to include commercial air transport operations.

It said on Tuesday the redeemable convertible notes will mature 60 months from the closing date of the first sub-tranche of the tranche one notes.

SMTrack had on the same day entered into a conditional subscription agreement with Advance Opportunities Fund (AOF) and Advance Opportunity Fund 1 (AOF 1) for the proposed notes issue, which will be issued in four tranches.

It said that based on the maximum conversion shares, SMTrack will only issue up to 450 million conversion shares upon conversion of the notes.

If the total number of conversion shares issued have already reached the maximum conversion shares, it shall redeem the outstanding unconverted notes at 110% of its principal amount.

As for the companies which are subscribing to the notes, SMTrack said AOF manages its own funds and investment portfolios and invests in a variety of financial instruments in Malaysia.

Tan Choon Wee is the founder and director of AOF and Nicholas Lin Kuan Liang is the director of AOF.

As for AOF I, it is an open-ended fund of which Tan and Lin are directors of AOF 1. AOF I is managed by Singapore-based ZICO Asset Management Pte. Ltd -- a private wealth manager for high-net-worth and family office clients based in Asean.

“The proposed notes Issue will not be underwritten as the subscribers has been identified and the subscription agreement has been entered into on Tuesday, ” SMTrack said.

SMTrack will use RM25mil as down payment for the lease to purchase one aircraft and RM38mil within three years to purchase an aircraft, RM45.59mil as working capital.

SMTrack Group currently is involved in research, design, deployment and distribution of RFID.

To recap, on July 3,2019, SMTrack entered into a sale of shares agreement to buy 3.24 million shares or 60% in Citilink (M) Aviation Sdn Bhd (CASB) from Alvin Heng Jee Zhi for RM2.80mil. The purchase was completed on Sept 23,2019.

The acquisition would enable SMTrack to have a diversified source of income from the existing business and air operator business, which is expected to contribute positively to the group’s future earnings and also to reduce the dependency on its existing business.

CASB intends to offer direct cargo air freight to their final destinations from Penang International Airport and Kuala Lumpur International Airport (KLIA).

Cargo in Penang are trucked down to before being air freight to their intended destinations.

The direct routes CASB intends to operate for their air cargo carriage services to cities including Bangkok, Mumbai, Shanghai, Shenzhen, Tokyo and Chennai.

These direct cargo routes are expected to be operated three times a week. Moreover, whilst air cargo is CASB’s primary focus, CASB may subsequently venture into air passenger services from the Penang International Airport and is targeting major cities across Asia Pacific as their flight destinations.

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