The Ministry of Finance (MoF) Inc will be pumping RM1.25 billion into Proton Holdings Bhd as a conditional soft loan as was announced in April.
The conditional soft loan was first announced by International Trade and Industry Minister Mustapa Mohamed shortly after former prime minister Dr Mahathir Mohamad relinquished his position as Proton chairperson.
MoF Inc will be injecting the amount into Proton by subscribing to 1.25 billion units of new redeemable convertible cumulative preference shares (RCCPS) issued by the national carmaker to raise RM1.25 billion in cash.
“(The) Proton group plays a crucial role in the national automotive industry, with about 12,000 workers directly under the group and some 50,000 employed under the various vendor companies.
“In cognisance of this, the government agreed to subscribe to Proton’s RCCPS to provide financial support to Proton.
“This will also help rebuild the confidence of vendors and suppliers in Proton,” DRB-Hicom Bhd, which wholly owns the automaker, was reported as saying by The Edge Financial Daily today.
Proton will issue the RCCPS to Govco Holdings Bhd, which is 99.99 percent owned by MoF Inc, according to DRB-Hicom’s announcement to Bursa Malaysia.
Barely four years ago, DRB-Hicom had made Proton private by paying RM1.29 billion cash to Khazanah Nasional Bhd, the investment arm of MoF Inc, to acquire Khazanah’s 43 percent stake in the national carmaker.
DRB-Hicom shares to drop to 20.72 percent
Now that MoF Inc has 1.25 billion RCCPS in Proton, should it choose to convert that and the unpaid dividend declared for Proton’s RCCPS of RM574 million into 2.1 billion new Proton shares, DRB-Hicom’s holdings will be reduced from 100 percent to 20.72 percent.
MoF Inc, through Govco, will then own approximately 79.28 percent of Proton.
“The RCCPS have a par value of one sen each and premium of 99 sen each at an issue price of RM1 each.
“The preference shares have a dividend of four percent per annum on a cumulative basis.
“The conversion ratio is at one unit of Proton’s RCCPS to 1.152 units of Proton’s shares.
“The tenure for the RCCPS is up to 15 years after the issuance date,” The Edge Financial Daily report says.
MoF Inc’s subscription of Proton’s RCCPS is conditional on Proton relocating its manufacturing plant from Shah Alam to Tanjung Malim, said DRB-Hicom.
It is also conditional on Proton presenting a restructuring plan to the Performance Management and Delivery Unit-led committee, which consists of members appointed by the government.
This committee will be responsible for monitoring the implementation of the plan.
Proton is also required to seek a strategic and renowned partner to assist in research and development to become a competitive player in the automotive industry on an international level, within one year from the subscription agreement.
The RCCPS will enable Proton to regularise its cash flow and settle long-outstanding balances to to the carmaker’s various international and local creditors, vendors and suppliers, DRB-Hicom said.
It also noted that Proton’s flagging sales in recent years had affected it's cash flow.
