UEM Land proposes rights issue to raise RM970m

KUALA LUMPUR: UEM LAND HOLDINGS BHD has proposed to undertake a rights issue to raise up to RM970 million of which the bulk would be used to repay the UEM Group term loan of RM633 million and RM266.2 million for property development.

UEM Land said on Monday, Jan 11 the rights issue, while enabling it to repay the loan, would enable it to achieve a more robust capital structure.

"In addition to reducing debt, the proposed rights issue will also increase the UEM Land's shareholders' funds, which would improve its gearing level. In this respect, the group is also expected to be better-positioned to obtain debt funding for its future business development and expansion activities," it said.

UEM Land the corporate exercise would enable it to raise funds (without incurring interest costs) to part finance the Cyberjaya land acquisition and for property development expenditure, payment of outstanding trade payables and general working capital purposes which are expected to contribute positively to the future profitability and/or cashflow position of the group.

"In addition, the Cyberjaya land acquisition is expected to provide further diversification of the UEM Land group's future earnings," it said.

UEM Land said as compared to a private placement of new equity securities in UEM Land, the proposed rights issue would allow all of UEM Land's shareholders to participate in an equity offering on a pro-rata basis to avoid dilution of interest and to acquire new shares at a discount to prevailing market prices.

It said UEM Group Bhd, a major shareholder of UEM Land, would subscribe in full its entitlement under the rights issue. As at Dec 31, 2009, UEM Group holds directly 1.87 billion UEM Land shares or 77.14%. Under the exercise, UEM Group’s minimum subscription amount will be about RM748.2 million.

By The EDGE Malaysia (by Joseph Chin)