MRCB to issue rights shares at 79 sen each

PETALING JAYA: Malaysian Resources Corp Bhd (MRCB) has fixed the issue price for its rights shares at 79 sen each – a fifth lower than the indicative price of RM1 announced in May.

In a statement to Bursa Malaysia, the property development, engineering and construction group said the entitlement date for the rights shares was on Oct 4.

MRCB first announced the proposed rights issue with free detachable warrants to raise at least RM2.2bil from its shareholders on May 17, a move that would see its gearing being reduced to almost zero.

Since the company made that announcement, its share price has slid 30% to close at RM1.19 on Tuesday.

According to MRCB, the issue price represents a discount of about 20.20% to the theoretical ex-rights price (TERP) of MRCB shares. 

The  fund-raising exercise will be on the basis of one rights share for every existing MRCB share held and one free warrant for every five rights shares subscribed.

In Tuesday’s announcement, MRCB said the board had fixed the exercise price for the rights warrants at RM1.25 each. (In the announcement in May, the company had used an indicative price of RM1.60.)

The renounceable rights issue exercise will involve up to 2.85 billion new MRCB shares, together with up to 570.76 million free detachable warrants.

The biggest allocation from the proceeds – RM975mil – would be used as advances to 85%-owned subsidiary Rukun Juang Sdn Bhd to finance the Kuala Lumpur Sports City privatisation.

While the first phase (Project 1) of the privatisation has been completed,  the gross proceeds earmarked for advances to Rukun Juang may also be used to replenish the subsidiary’s internally generated funds and/ or repayment of bank borrowings which it had used to fund that first phase.

A sum of RM826.31mil is to be used to repay bank borrowings, which is expected to result in  an annual gross interest savings of about RM46.69mil.

With a lower amount of proceeds, the allocation for property development activities and/or construction projects is expected to be cut.

MRCB said it had entered into an underwriting agreement with RHB Investment Bank, CIMB Investment Bank Bhd and CIMB Islamic Bank Bhd to underwrite up to 1.73 billion rights shares together with 345.55 million rights warrants.

This represents 60.5% of the total rights shares with rights warrants to be issued under the maximum scenario, for which no undertaking has been obtained from other shareholders of MRCB.