German Billionaire’s RM550m Bond Injection to Supercharge KNM’s Financial Health

Cash-trapped KNM Group Berhad is in need of fresh capital injection to jump-start its business and salvage its assets, and for that matter, a group of shareholders led by German billionaire Andreas Heeschen is proposing an RM550 million bond that will help in the company’s restructuration plan.

As a matter of fact, they plan to grow KNM to its fullest potential, with the new board’s plan being the turning point and introducing sustainable growth over the next five years.

“We are confident that we can deliver a bond to European institutional investors already identified in the amount of € 110 million (RM550 million) using certain collateral of KNM’s assets and begin paying back creditors within 90 days of taking over the board. This bond issue is subject to customary due diligence and information that we currently do not have access to,” says the German billionaire.

Tunku Kamariah Aminah Maimunah Iskandariah Binti Sultan Iskandar of Johor is expected to lead the proposed directors and become the group’s chairperson upon joining the KNM’s board. German billionaire Heeschen and five other directors are expected to take on important roles.

The group of KNM Group shareholders expressed deep concern about the management’s current plan for selling assets. They find the plan, explained in the KNM Explanatory Statement to Creditors, alarming due to its potential harm to the company’s shareholder value, especially considering the company’s financial difficulties.

“This plan, which details the disposition of assets, has raised alarms among us due to its potential impact on shareholder value. It is our belief that the existing proposal falls short of addressing the comprehensive needs of all KNM stakeholders and ensuring long-term shareholder value,” says the shareholders during a presser at the Concorde Hotel today morning.

Heeschen’s Major Push

Tunku Kamariah and Mr Heeschen are leading the group of KNM Group Bhd shareholders who are planning to take over the company’s leadership at Monday’s EGM. The group of shareholders are Mr Edwin Silvester Das, Mr William H Van Vliet III, Dato’ Abd. Ghani bin Yusof,Tunku Kamariah Aminah Maimunah Iskandariah Binti Sultan Iskandar, Mr Andreas Heeschen, Mr Flavio Porro, and Dato’ Zaidi bin Mat Isa @ Hashim. 

Princess Kamariah is a member of the Johor royalty and the sister of the current Sultan of Johor. In recent months, she has been active in the Malaysian corporate world.

Princess Kamariah is the elder sister of the Sultan of Johor, who is expected to become Malaysia's Agong early next year.

Andreas, a friend of Tunku Kamariah, was invited to invest in Malaysia with the hope of restructuring KNM from its financial struggle while bringing in Foreign Direct Investment (FDI) and job creation.

Concerns also extend to KNM’s creditors since debts to suppliers and service providers form the backbone of KNM’s supply chain, says German billionaire Andreas Heeschen.

“Our apprehension extends to KNM’s creditors, a vital part of the company’s future. The debts owed to suppliers and service providers form the backbone of KNM’s supply chain, collectively supporting jobs and contributing significantly to the Malaysian economy. 

“To secure a promising future for KNM, it is imperative that all stakeholders, not just shareholders and creditors, stand to benefit from the company’s growth and its assets,” says Heeschen.

According to a Bursa Malaysia filing on Wednesday, Heeschen has upped his stake in KNM Group Bhd to 8.249% following the acquisition of a further 13.6 million shares or a 0.336% stake in the open market.

In the Bursa filing, KNM said Heeschen bought the block of shares in two tranches, of which 3.6 million shares were bought at 14 sen per share on Oct 9 and the remaining 10 million shares were bought the following day at 11.99 sen per share.

Meanwhile, Heeschen who has dismissed speculation that they would sell KNM’s crown jewel, the Borsig Group, says the group has a better plan for the company’s future.

Their plan includes the injection of capital and assets, significant investments, upgrades in professional management, cross-border transactions, cooperation with inter-governmental bodies, partnerships with Fortune 500 companies, and financial engineering.

Future Plans: €110 million (RM550 million) Bond

As a matter of fact, they plan to grow KNM to its fullest potential, with the new board’s plan being the turning point and introducing sustainable growth over the next five years. 

On the bond, Heeschen indicates once this bond is placed and a much better understanding of the company’s financials is obtained a shareholder capital increase estimated to be up to RM 600 Million will be placed. The purpose of this new money is to reset the balance sheet of the company and to provide the necessary capital to finance KNM’s operations at the group level.

To ensure that the company’s future is safeguarded, the group plans to put the company into a 5-year Restructuring Plan to turn around non-performing assets and create shareholder value. This includes investments into existing assets such as restarting work in the Malaysian workshops and the ethanol plant in Thailand subject to due diligence.

The Borsig IPO can still be accomplished, assuming that the conditions are favourable to the KNM shareholders.

Additional business with a green horizon

They plan to infuse additional business support into the Group to enhance the capacity of all its operating subsidiaries. This encompasses investment in the Impress ethanol project in Thailand, with the aim of reactivating the facility and potentially scaling it up from 200,000 to 500,000 litres per day. Like other assets within KNM, it’s believed that this asset has the potential to perform well with the right infusion of capital and management.

Protecting the Customers

“As shareholders, we are concerned about protecting our own interests, along with the 34,018 other shareholders.  The plan of current management details how the Board of Directors plan to dispose of assets and leave KNM shareholders with low or any value.  

“It is our opinion as shareholders that the existing plan will not meet the needs of all of KNM stakeholders or allow significant shareholder value in the future. However, we will also protect our customers. The customers are key to the company,” Heeschen adds.

“We are interested in safeguarding the interest of the customers. They are the number one for the company. They expect the company to revive its operations that will lead to the return of the equity value that will in turn help to turn the company around,” he told the media conference today.

Existing Debt Restructuring Plan

Saying that the current board’s Explanatory Statement is misleading and inaccurate, they add that after a year under the current management, KNM has been unable to prepare an acceptable scheme which would accomplish repayments of creditors as stated by the High Court of Malaya in KL in the hearing on 11^th of October, 2023. Whereby the decision to appoint a professional liquidator was taken.

“The purpose of this liquidator is not to liquidate the company but to professionally reassess the scheme and the information contained in the explanatory statement. Notwithstanding the said court decision, a creditors meeting was held on 12^th October 2023 and creditors have been asked to vote.  

“We have obtained professional legal advice that this is in contempt of court as the court directed the meeting to be called off,” Flavio Porro, an Italian lawyer who is part of the shareholder group bidding to take over the company’s management.

The group also spoke on plans by the company to sell one of its assets, the FBM Hudson Italiana SpA, is flawed in many ways.  

During the last ten months of management, the company lost all of its lender’s support, which provoked a fall in its value.  “That has reduced the potential described in the ES plan bringing little to no value to stakeholders and is not likely to close due to numerous compliance issues concerning the Italian Golden Power approval process among other legal hurdles,” says Mr Porro.

Meanwhile, the sale or IPO of Borsig is a disadvantage because KNM loses control and its revenue. The proceeds from the IPO will go to Borsig, not to KNM, they say, which is the company that is cash-trapped. 

They believe there can be benefits to a future BORSIG listing and the new directors will look closely at the possibilities and opportunities and engage professional advisors to review this option. 

They lament on a lack of substance in the ES underpinning future proceeds from an IPO or pre-IPO with which creditors could be satisfied therefore maintaining the equity value of the company.

“Selling its main assets as detailed in the ES is something that the Current management specifically claimed to the press would not happen when they took over control of the company.” they assert.