MINHO to convert debt owed into equity

Timber concern Minho (M) Bhd yesterday announced that it would convert debt owed by two of its wholly owned subsidiaries into new equity shares in the subsidiaries.

Minho said in a Bursa Malaysia announcement that it would settle RM39.81 million in long-term receivables from Syarikat Minho Kilning Sdn Bhd (SMKSB) and Idaman Heights Sdn Bhd (IHSB) into new equity shares of RM1 each.

SMKSB’s RM35.01 million debt would be satisfied via the issuance of 35.01 million new shares while IHSB’s RM4.87 million owing to Minho would be satisfied by the issuance of 4.8 million new shares.

The exercise would increase SMKSB’s paid-up capital from RM6.14 million to RM35.01 million, and IHSB’s to RM4.8 million from RM100,000. Meanwhile, the authorised capital of each company has been raised to RM50 million from RM7 million and to RM5 million from RM100,000 respectively.

Minho said the conversion was in the best interests of both parties and did not change the risk profile for either of the companies. It added that the cashflow of the companies would not be affected as the loans to the subsidiaries were equity-like in that they were interest-free and with an indeterminate repayment deadline.

“SMKSB and IHSB are wholly owned by Minho and the funding of both subsidiaries’ business activities came from their own internally generated funds and from Minho,” the company said in the announcement.

“The long-term payable by SMKSB and IHSB was interest free and payable at the discretion of SMKSB and IHSB. This is synonymous with an equity instrument under the definition of FRS 139...the conversion is to formalise the long-term debt into equity.”

The conversion would not have any effect on Minho’s shareholding structure, nor to impact the company’s net assets and gearing. The conversion was also not expected to impact the earnings for Minho for its FY ending Dec 31, 2010.

The conversion was not subject to shareholder or regulatory approval, Minho added. SMKSB is primarily involved in kiln-drying and chemical treatment of sawn timber, while IHSB is mainly involved in the letting of property in Port Klang.


Written by Fong Min Hun
The Edge Malaysia