Asia Brands to issue shares to raise RM27.57m

PETALING JAYA: Asia Brands Bhd has proposed to issue and allot 31.99% of its share capital to raise cash proceeds of RM27.57 million to repay bank borrowings.
The company entered into a conditional share subscription agreement with Trackland Sdn Bhd for the exercise. The subscription shares are to be issued at 74.1 sen per share and satisfied in cash.
The proceeds raised are expected to be utilised for repayment of the Islamic medium-term notes (IMTN).
The group said its auditors have expressed an unqualified opinion of the financial statements of Asia Brands for the financial year ended March 31, 2017.
However, the auditors had drawn attention to the material uncertainty related to its going concern because the group had net current liabilities which arose from the reclassification of IMTN to current liabilities as a result of non-compliance with financial covenants as required in the IMTN.
"The proposed share issuance will enable Asia Brands to raise gross proceeds of RM27.57 million mainly to pare down its debt through the part repayment of IMTN and thus result in an estimated interest savings of RM1.66 million per year," it said.
The part repayment of IMTN will address the concern of the IMTN holders on the recoverability of the loan to Asia Brands, liquidity and the financial position of the group. Further, the gearing ratio of Asia Brands will improve from 0.99 times to 0.66 times upon the part repayment of the IMTN of the group.
"The board is of the opinion that the exercise is the most cost-effective method to raise capital to meet the group’s needs in the short-term with the part repayment of IMTN and the most expeditious way to raise funds from the capital market as opposed to other forms of fundraising."
It is expected to contribute positively to the earnings of the group for the financial year ending March 31, 2018 and for the future years when the benefits of the utilisation of proceeds are realised.
The earnings per share of the group will however be proportionately diluted as a result of the increase in the number of shares after the exercise.
Asia Brands said the relevant applications to the regulatory authorities will be made within two months.
Barring any unforeseen circumstances and subject to all required approvals being obtained, the exercise is expected to be completed in the first quarter of 2018.