KAB Confirms Growth Aspirations With the Issuance of an RM500 Million Multi-currency Sukuk

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Kejuruteraan Asastera Bhd (KAB), a provider of electrical and mechanical engineering services, stated on Wednesday (Sept 29) that it has lodged a multi-currency Islamic medium-term note programme (multi-currency sukuk programme) with a nominal value of up to RM500 million.

KAB stated in a statement on Wednesday that the multi-currency sukuk programme, which was issued through its wholly-owned subsidiary KAB Energy Power Sdn Bhd, is based on the Shariah concept of Murabahah and has a 30-year maturity.

The electrical and mechanical engineering services company noted that the proceeds of the programme will be used to finance future energy-related value-adding initiatives and acquisitions in Malaysia and the Asia region, as well as to restructure KAB’s existing debt.

“This will enable the group to raise funds in a variety of sizes and tenures to achieve optimal asset-liability matching through the capital markets,” it added.

KAB stated that Public Investment Bank Sdn Bhd has been appointed as the programme’s principle adviser, lead arranger, and lead manager. The programme would be funded in tranches.

“Public Islamic Bank Sdn Bhd has indicated its desire to subscribe to the first tranche of the Multi-Currency Sukuk Programme,” KAB stated.

Furthermore, KAB stated that Danajamin Nasional Sdn Bhd has agreed to guarantee the initial tranche.

“Tranches guaranteed by Danajamin are equivalent to a ‘AAA’ rating, as Danajamin is rated ‘AAA’ by both RAM Rating Services Sdn Bhd and Malaysian Rating Corp Sdn Bhd,” the group noted.

Datuk Lai Keng Onn, managing director of KAB, said the multi-currency sukuk programme is an important milestone for the organisation as it enters the next phase of expansion in its energy industry.

He stated that KAB is aggressively seeking greenfield and brownfield energy assets, such as solar energy generation, hydropower plants, and biogas, due to the sector’s huge expansion.

“As a result, this programme provides us with an excellent chance to acquire long-term capital in the capital market and increase our flexibility in managing our cash flows, as well as adapt our debt issuance to meet financing needs at a reduced interest rate,” he added.

Lai stated that the business will be able to leverage the cash flow generated by the loan offering to fund future expansion aspirations.

“The challenging economic environment, exacerbated by the Covid-19 pandemic, has not deterred KAB as we continue to expand our existing business regionally and expand our green energy solutions business segment in Asia, particularly in Vietnam, Indonesia, and India, propelling KAB to greater heights,” he added.

In a March interview with The Edge, Lai stated that KAB was considering entering the local debt market for the first time in order to raise up to RM500 million to fund its expansion into the energy efficiency and energy generating segments.

KAB’s shares closed half a sen or 1.25 percent lower at 39.5 sen, valuing the company at RM669.7 million.

Published by Zack Baharum

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