Debt revamp key to Kinsteel’s revival
> Regularisation plan will involve a proposed ‘substantial haircut’ to amount due, says CEO
PUTRAJAYA: Ailing steel maker Kinsteel Bhd is betting on the successful implementation of its debt restructuring scheme, which is key to its revival plan.
According to CEO Datuk Henry Pheng Chin Guan, the debt restructuring will involve a proposed “substantial haircut” to its debt, which stands at around RM800 million currently.
“We’ve submitted the regularisation plan to the lenders. We’ve appointed a new scheme advisor UHY to manage the scheme and we’ll be calling a meeting for all the lenders very soon… Our plan also includes the restructuring of share capital. We hope to get approval within three months,” he told reporters after the company’s AGM yesterday.
Kinsteel’s main creditors are RHB Bank, OCBC and Standard Chartered Bank. It also has a corporate guarantee of RM900 million for its 28.39%-owned associate Perwaja Holdings Bhd, which was delisted in May 2017, after the lapse of its regularisation scheme with China’s Zhiyuan International Investment & Holding Group (Hong Kong) Co Ltd.
Managing director Tan Sri Pheng Yin Huah said most of the lenders have agreed to its debt restructuring scheme.
Besides the debt restructuring plan, Chin Guan said Kinsteel is also considering a second option of bringing in new local investors to the company for injection of funds.
“We’ve a few investors that have an interest to participate in the restructuring plan, which we’ve resubmitted to Bursa Malaysia for consideration.” However, he declined to disclose the details.
Trading in Kinsteel shares has been suspended since Jan 5 after the regulator rejected its application for a further extension of time to submit its regularisation plan. The decision to delist the company has been deferred pending its appeal along with the submission of a new revamp plan.
Kinsteel was categorised as Practice Note 17 (PN 17) company in October 2016 following a disclaimer opinion in the company’s financial statements ended June 30, 2016 by its auditors.
Despite concerns over Kinsteel’s prospects, a long time shareholder whom SunBiz spoke to said he is hoping that there will be light at the end of the tunnel.
“Without addressing the debt issue, the company can’t really do anything. That’s why we still give them chance for the implementation of the debt restructuring scheme,” he noted.
Kinsteel, which has been in the red for years, reported a widened net loss of RM324 million for the financial year ended June 30, 2017 compared with RM74 million a year ago, due to impairment of securities and related parties debts amounting to RM171 million arising from redeemable convertible unsecured loan stocks (RCULS) and receivables in Perwaja.
For the first quarter ended Sept 30, 2017, its net loss was also higher at RM29.1 million against RM11.47 million in the previous corresponding period.
Currently, Kinsteel has three major production lines in the country with a capacity of 80,000 tonnes per month. Going forward, it is looking to build a new blast furnace for the supply of cheap raw materials to its production lines.