Wednesday, October 12, 2011

JCorp to raise RM2.5bil (PHOTO)

Johor Corp (JCorp) plans to issue up to RM2.5bil in bonds in a move to refinance its debt that will be due by the middle of next year, reliable banking sources said.
“The bond issuance will refinance the bulk of debt that is coming due next year, meaning that JCorp may not need to carry out any big asset sale soon although there is still a small shortfall,” one banker said.
JCorp has about RM6.6bil in outstanding debt, out of which RM3.6bil is due to be repaid by July 2012.
In August, one of JCorp's units, Kulim (M) Bhd, said it was buying RM700mil worth of oil palm estates and mills from its parent, JCorp, a deal partly aimed at helping the latter solve its huge impending debt obligations.

The proceeds from this sale together with the new bond issuance will raise a total of RM3.2bil, leaving a shortfall of RM400mil.
The debt papers that are coming due in July are mostly held by banks, mainly CIMB Investment Bank and Maybank Investment Bank. It is likely that these institutions will take up the new bond issuance.

JCorp has a string of other assets to dispose of including its interest in Pusat Bandar Damansara, which by some estimates is worth more than RM1bil.
JCorp also owns 53% of Kulim, which in turn owns 50% of London-listed New Britain Palm Oil Ltd (NBPO) and 57.5% of QSR Brands Bhd. QSR owns 50.6% in KFC.
Kulim can easily fetch top dollar in hiving off any of these assets. But it should be noted that if these assets were to be sold, the sale proceeds would be “trapped” at Kulim.
What that means is that if the money Kulim got from the sale of NBPO or QSR were to be paid out in dividends, JCorp would only get half of that, with Kulim's other shareholders enjoying the proceeds as well.
JCorp receives only a paltry amount of dividends every year. Its dividend receipts amounted to around RM10mil over the last 10 years, despite the total revenue figure of all companies in the group hitting billions of ringgit every year.

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