WHILE cash-strapped KNM Group Bhd said it will appeal against a Kuala Lumpur High Court decision yesterday (Nov 3) to dismiss its application to extend the restraining order (RO) against its scheme creditors, some disgruntled shareholders want CEO Ravindrasingham Balasingham to take the rap for the latest development.
Barely a fortnight since the futile attempt by German tycoon Andreas Heeschen to remove the present board helmed by Tunku Datuk Yaacob Khyra via-a-vis an extraordinary general meeting (EGM) on Oct 16, the shareholders claimed they felt cheated that “the SOA (scheme of arrangement) in real terms and effect remains a pie in the sky to-date”.
“KNM now has no scheme! There is insufficient financial disclosure, hence the scheme turns out to be unfeasible based on available financial information,” lamented a retail investor who spoke on condition of anonymity to FocusM.
For context, the KL High Court had on Thursday (Nov 2) shot down an application for the prolongation of the RO on grounds that the petitioners, KNM Process Systems Sdn Bhd and its associated bodies did not fulfill the stipulations delineated in Section 368 of the Companies Act 2016 which includes the obligation to submit timely statements of affairs and the impartial nomination of directors.
Apart from failure to lodge a statement of particulars within the stipulated period, the re-appointment of director Steve Ho Soo Woon effective yesterday (Nov 3) – just barely a fortnight after he was ousted on Oct 16 – was challenged due to concerns over independence and the omission of certain debts in the voting procedure.
The court also ascertained that the proposed arrangement scheme was “doomed to fail” as it lacked the requisite 75% creditor approval, with substantial resistance from principal creditors such as Ann Joo Metal Sdn Bhd and Ann Joo Metal (Singapore) Pte Ltd.
The court further underscored the scheme’s lack of transparency and inadequate financial disclosure concerning the proposed asset liquidation intended for debt settlement.
This is when the presiding judge Liza Chan Sow Keng stressed that the proposed disposals of assets including Borsig GmbH, FBM Group, Thai Assets and UK Assets were projected to fall short in generating sufficient funds to satisfy the scheme’s debts, thereby rendering the scheme unfeasible.
Above all else, the court criticised the scheme for not offering a more favourable outcome than liquidation for the creditors and for its lack of contingency on shareholder consent which is of heightened importance given the current shareholder disputes within the company.
Nevertheless, the oil & gas (O&G) engineering outfit said it will appeal the KL High Court decision in the Court of Appeal. “In the meantime, an ad interim RO (Erinford Injunction) was granted. The next case management was fixed on Nov 14,” noted KNM in a Bursa Malaysia filing.
In all fairness to its shareholders, things have not really been looking up for KNM shareholders since its Oct 16 EGM. Its share price, for one, is still languishing even as the counter ended 0.5 sen or 5.26% higher at 10 sen at the close of yesterday’s (Nov 3) trading which valued the company at RM405 mil.
To-date, KNM has yet to liberate itself from its Practice Note 17 (PN17) status with the company having submitted an application on Oct 30 to extend the deadline by a further one year to Oct 30, 2024.
This comes about after the company fell into PN17 in end-October 2022 as its existing liabilities exceed its current assets after a deal fell through to dispose of German machinery manufacturer Borsig – deemed the company’s crown jewel – to pare its debt, some of which it missed payment as early as in November 2021.
To further rub salt on the wound, while German billionaire Heeschen still remains a substantial shareholder with 8.25% stake in KNM since Oct 10, Datuk Seri Mahmud Abu Bekir Taib who claimed to have supported the Tunku Yaacob faction during the Oct 16 EGM has ceased to be a substantial shareholder after having offloaded 1.1 million shares (holding less than 5% stake) on Oct 30.
The Sarawakian tycoon had in the run-up to the company’s EGM acquired a 5.03% stake or 203.47 million shares from the open market.
Given the current shape of affairs, it is no wonder emotions flare among KNM shareholders. “Therefore, even the Revised Scheme does not result in a better liquidation return to the creditors of KNM Process (Systems),” a long-time KNM retail investor lambasted.
“Previously Ravi (CEO) called out others ‘pie in the Sky’. Now everybody knows he’s talking about himself. Ravi should resign! Shameful!” – Nov 4, 2023
