KNM Group to issue Thai bonds worth up to US$80m for bioethanol plants

PETALING JAYA: KNM Group Bhd plans to issue up to US$80 million (RM329.9 million) Thai bonds to raise funds for the construction of bioethanol plants in Thailand.
KNM told Bursa Malaysia the plants are to be constructed by Impress Ethanol Co Ltd (IEL), a 72%-owned subsidiary of recently acquired Asia Bio-Fuels Ltd and Asia Bio-Fuels II Ltd.
Construction of the first phase of IEL’s bioethanol plant with a production capacity of 200,000 litres ethanol a day is ongoing. The construction of Phase 2 of the bioethanol plant for an additional 200,000 litres ethanol a day is expected to start by the first half of 2017 due to the favourable ethanol market demand in Thailand.
KNM will use proceeds from the proposed Thai bonds to provide foreign currency lending to IEL, which will in turn use it for, among others, financing future expansion and working capital expenses for its bioethanol plants.
The Thai bonds will be guaranteed by Credit Guarantee and Investment Facility (CGIF), a trust fund of the Asian Development Bank.
With the credit guaranteed from CGIF, the proposed bond issue has been assigned a credit rating of “AAA/Stable” (rated tiple ‘A’ with a stable outlook) by TRIS Rating Co Ltd.
The proposed bond issue is expected to be fully issued by December this year. The total costs related to the proposed issuance to be incurred in the fourth quarter of 2016 is estimated at RM1.1 million.
The interest payments will be dependent on the final coupon rates to be fixed, KNM said.
United Overseas Bank (M) Bhd was mandated as the principal adviser to handle the bond issuance.
The issuance will see KNM’s gearing ratio expand to 0.38 from 0.27 as at Dec 31, 2015. The group’s total debt will increase from RM 718.5 million as at Dec 31, 2015 to about RM1.04 billion.
KNM’s board of directors is of the opinion that the acceptance of the proposed Thai bonds is in the best interest of the group.
The company’s shares fell half a sen to 40.5 sen yesterday, with some 8.59 million units changing hands.