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ONCE touted as the darling of investors, KNM Group Bhd finds itself in the league of distressed companies after it slipped into the Practice Note 17 (PN17) category.
Its shares plunged to five sen each, current liabilities have exceeded current assets and the group foresees itself returning to profitability only in the next “two to three years”.
Cash crunch issues are also limiting KNM from taking on more new projects.
The root cause of the quagmire plaguing KNM could be traced back to the series of acquisitions the group made many years ago.
The acquisitions, despite injecting good assets into KNM, had over-leveraged the group and by the time the Covid-19 pandemic hit, KNM’s cash generation was no longer able of meeting the high debt levels.
The current line-up of board members, who are onboard since the second half of last year, recognise the urgent need to de-leverage KNM.
This includes the single largest shareholder, Datuk Tunku Yaacob Khyra, who controls a 9.4% stake in KNM.
They have been working on removing highly-leveraged assets from the group’s books.
KNM is expected to be a cash-rich company with a healthier balance sheet by the end of next year.,
Executive chairman Tan Sri Zulhasnan Rafique says KNM would not have slipped into PN17 had the proposed disposal of its entire stake in Borsig GmbH, a German-based process equipment manufacturer, was completed before the deadline of KNM’s financial audit.
“We only secured the shareholders’ approval in September (to sell Borsig). It will take a few months to complete the disposal.
“If the disposal had been completed before end-October, we would have settled the amount owed on the bond we defaulted on earlier. It would have prevented KNM’s current liabilities from exceeding its current assets.
“This triggered the PN17 criteria,” the former Federal Territories Minister tells StarBizWeek.
It is noteworthy that KNM had, in Nov 2021, missed principal and coupon payments on bonds issued in Thailand worth 2.78 billion baht (RM356.8mil).
The bonds are guaranteed by Credit Guarantee and Investment Facility (CGIF), a trust fund managed by the Asian Development Bank.
CGIF has paid the bondholders on behalf of KNM.
“CGIF has been quite patient with us and they have been working with KNM to make sure that the sale of Borsig will go through and from it (the disposal), it will get paid,” he says.
Zulhasnan points out that the disposal of Borsig will “definitely” be completed by next month and that investors should not be worried about the PN17 status.,