NEW ISSUE OF SECURITIES (CHAPTER 6 OF LISTING REQUIREMENTS) : FUND RAISINGKNM GROUP BERHAD ("KNM" OR THE "COMPANY") PROPOSED PRIVATE PLACEMENT OF UP TO 10% OF THE ISSUED ORDINARY SHARES IN KNM

NEW ISSUE OF SECURITIES (CHAPTER 6 OF LISTING REQUIREMENTS) : FUND RAISING KNM GROUP BERHAD ("KNM" OR THE "COMPANY") PROPOSED PRIVATE PLACEMENT OF UP TO 10% OF THE ISSUED ORDINARY SHARES IN KNM

KNM GROUP BERHAD

Type	Announcement
Subject	NEW ISSUE OF SECURITIES (CHAPTER 6 OF LISTING REQUIREMENTS)
	FUND RAISING
Description	KNM GROUP BERHAD ("KNM" OR THE "COMPANY")

PROPOSED PRIVATE PLACEMENT OF UP TO 10% OF THE ISSUED ORDINARY

SHARES IN KNM

On behalf of the Board of Directors of KNM ("Board"), M&A Securities Sdn Bhd ("M&A Securities") wishes to announce that the Company proposes to undertake a private placement of up to 334,132,800 new ordinary shares in KNM, representing not more than 10% of the issued ordinary shares in KNM ("Proposed Private Placement").

Further information on the Proposed Private Placement is disclosed in the attachment herein.

This announcement is dated 22 November 2021.

Please refer attachment below.

Attachments

KNM - Private Placement (22112021).pdf170.5 kB

KNM GROUP BERHAD ("KNM" OR THE "COMPANY")

PROPOSED PRIVATE PLACEMENT OF UP TO 10% OF THE ISSUED ORDINARY SHARES IN KNM

1. INTRODUCTION
   On behalf of the Board of Directors of KNM ("Board"), M&A Securities Sdn Bhd ("M&A Securities") wishes to announce that the Company proposes to undertake a private placement of up to 334,132,800 new ordinary shares in KNM ("KNM Shares" or "Shares"), representing not more than 10% of the issued ordinary shares in KNM ("Proposed Private Placement").
   The Proposed Private Placement shall be undertaken in accordance with the general mandate pursuant to Sections 75 and 76 of the Companies Act 2016 ("Act") approved by the shareholders of KNM at the Annual General Meeting ("AGM") of the Company held on 29 June 2021 which authorises the Board to issue new KNM Shares not exceeding 20% of the total number of issued shares of the
   Company ("20% General Mandate"). The Shareholders' Mandate may be utilised until 31
   December 2021, after which the 10% limit under Paragraph 6.03(1) of the Main Market Listing
   Requirements of Bursa Malaysia Securities Berhad ("Bursa Securities") ("Listing Requirements") will be reinstated.
   Further details of the Proposed Private Placement are set out in the ensuing sections.
2. DETAILS OF THE PROPOSED PRIVATE PLACEMENT
   As at 10 November 2021, being the last practicable date preceding the date of this announcement
   ("LPD"), KNM has:
3. 1. an issued share capital of RM2,017,255,731 comprising 3,341,328,680 KNM Shares (excluding 1,841,275 Shares held as treasury shares by the Company ("Treasury Shares")); and
   2. 149,633,300 outstanding employees' share option scheme ("ESOS Options").

The Proposed Private Placement will entail the issuance of up to 334,132,800 new KNM Shares ("Placement Shares"), representing not more than 10% of the existing number of issued Shares as at LPD (before the exercise of ESOS Options and excluding Treasury Shares). For avoidance of doubt, any increase in the number of issued Shares arising from the resale of Treasury Shares or exercise of the ESOS Options will not affect the number of Placement Shares to be issued under the Proposed Private Placement.

The Proposed Private Placement may be implemented in multiple tranches, if required, by 31 December 2021 after the date of approval of Bursa Securities for the Proposed Private Placement.

2.1 Basis of arriving at the issue price of the Placement Shares

The issue price of each tranche of the Placement Shares, where applicable, shall be determined separately and fixed by the Board at a later date after obtaining the relevant approvals for the Proposed Private Placement. The Board will take into consideration amongst others, the prevailing market conditions and the provisions of Paragraph 6.04(a) of the Main Market Listing Requirements of Bursa Securities ("Listing Requirements"), in determining the issue price of the Placement Shares at a discount of not more than 10% to the volume weighted average market price of KNM Shares for the 5 market days ("5D-VWAMP") immediately preceding the price fixing date(s).

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For illustrative purposes, assuming the Placement Shares are issued at an indicative issue price of RM0.160 per Placement Share ("Indicative Issue Price"), this represents a discount of approximately 8.68% to the 5D-VWAMP of KNM Shares up to and including 19 November 2021 (being the market day preceding the date of this announcement) of RM0.1752 per KNM Share. Based on the Indicative Issue Price, the Proposed Private Placement will raise gross proceeds of RM53.46 million. The mechanism to determine the issue price of each tranche of the Placement Shares shall be determined separately in accordance with market-based principles.

2.2 Placement arrangement

The Placement Shares will be placed to independent investor(s) ("Placees"), where the Placees shall be person(s) or party(ies) who/which qualify under Schedule 6 and Schedule 7 of the Capital Markets and Services Act 2007, who shall be identified at a later date.

In accordance with Paragraph 6.04(c) of the Listing Requirements, the Placement Shares will not be placed to the following parties:

1. the interested director, interested major shareholder, interested chief executive of KNM or a holding company of KNM, or interested persons connected with such director, major shareholder or chief executive of KNM; and
2. nominee corporations, unless the names of the ultimate beneficiaries are disclosed.

Subject to the prevailing market conditions and depending on investors' interest at the point of implementation, the Proposed Private Placement may be implemented in a single or multiple tranche(s) within 6 months from the date of approval of Bursa Securities for the Proposed Private Placement or such other approved extended period.

1. Ranking of the Placement Shares
   The Placement Shares shall, upon issuance and allotment, rank equally in all respects with the then existing issued KNM Shares, save and except that the holders of the Placement Shares shall not be entitled to any dividends, rights, allotments and/or other forms of distributions that may be declared, made or paid to the shareholders of the Company, for which the relevant entitlement date is prior to the date of allotment and issuance of the Placement Shares and the Placement Shares will be subject to all the provisions of the Constitution of the Company relating to transfer, transmission and otherwise.
2. Listing of and quotation for the Placement Shares
   KNM shall make an application to Bursa Securities for the listing of and quotation for the Placement Shares on the Main Market of Bursa Securities.

2.5 Utilisation of proceeds

For illustrative purposes, the placement proceeds to be raised from the Proposed Private Placement of RM53.46 million (based on the Indicative Issue Price) are expected to be utilised by KNM and its subsidiaries ("KNM Group" or "Group") in the following manner:

					#Expected
					timeframe for
			Amount		utilisation of
Details	Notes	RM'000		proceeds
Working capital requirements	(a)	22,161		Within 12 months
Repayment of bank borrowings	(b)	30,000		Within 6 months
Estimated expenses for the Proposed Private Placement	(c)	1,300		Immediate
Total			53,461
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Notes:

• From the listing date of Placement Shares on the Main Market of Bursa Securities.

1. KNM Process Systems Sdn Bhd, a wholly-owned subsidiary of KNM in Malaysia, has secured new process equipment contracts worth RM55.0 million for its range of process equipment comprising waste drums, tank and pressure vessels for its customers located in Australia, Malaysia and Brazil in September 2021. As at the LPD, the Group's unbilled order books for the process equipment contracts of approximately RM150.0 million are expected to be completed by October 2022. As such, the Group intends to utilise approximately RM22.16 million of the proceeds raised from the Proposed Private Placement to support its working capital requirements for its ongoing manufacturing and fabrication works of process equipment contracts, as follows:

					Estimated
No.		Details			allocation
(i)		Purchase of raw materials and consumables such as steel plates used to	50%
		fabricate the pressure vessels, fitting, forgings, electrodes for
		welding, sand blasting materials, industrial gas and related
		components for its fabrication works, and applicable import duties
(ii)		Payment to subcontractors and other suppliers engaged by KNM Group	20%
		for performing fabrication and site works as well as related services in
		the process equipment contracts secured, such as project
		management fees, product certification fees, engineering design cost,
		non-destructive testing and other related services
(iii)	Payment of logistical expenses for shipping of raw materials and	10%
		delivery of process equipment which includes port clearance charges,
		forwarding and shipping fees, transportation cost and other related
		costs
(iv)	Payment of operation overhead of KNM Group which includes labour	20%
		costs, factory expenses, statutory payment and other related costs
				100%

1. The Company intends to utilise up to RM30.0 million of the proceeds raised to repay its coupon payment and bank borrowings. As at 30 September 2021, the Group has total bank borrowings of RM1.28 billion, which comprise mainly bank overdrafts, banker's acceptances, bill payables, revolving credit, term loans, coupon payments on bond issuance and hire purchase. The breakdown of the utilisation of proceeds towards the payment of the Group's bank borrowings are as follows:

No.	Details			RM'000
(i)	Payment of coupon for the Thai Bonds	5,400
(ii)	Other bank borrowings		24,600
			30,000

Notes:

1. On 18 November 2016, KNM had issued the "AAA" rated Thai bonds of THB2,780 million
   (equivalent to approximately RM352.57 million) ("Thai Bonds") at a fixed coupon rate of 3.00% per annum and for a 5-year tenure period, which matured on 18 November 2021. These Thai Bonds are guaranteed by the Credit Guarantee and Investment Facility, a trust fund managed by the Asian Development Bank ("CGIF"). The proceeds raised

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from the issuance of the Thai Bonds were utilised to finance the expansion and working capital requirements of the bio-ethanol plant in Thailand, which is owned and operated by Impress Ethanol Co. Ltd ("IECL"), a 72.0% owned subsidiary of Asia Bio-Fuels Ltd and Asia Biofuels II Ltd (collectively, the "ABL Group"), which in turn are wholly-owned subsidiaries of KNM Renewable Energy Sdn Bhd (a wholly-owned subsidiary of KNM).

On 18 November 2021, KNM announced that a non-payment event has occurred in relation to the payment of the principal sum and coupon payment of the Thai Bonds amounting to THB2,780 million (approximately RM352.57 million) and THB42.04 million (equivalent to approximately RM5.42 million), respectively ("Non-PaymentEvent"). Under the terms and conditions of the Thai Bonds, the Company has up to 2 December 2021 for the payment of the principal sum of THB2,780 million (approximately RM352.57 million) and up to 9 December 2021 for the payment of coupon for the Thai Bonds of RM5.42 million. The Non-Payment Event has occurred as KNM has encountered challenges and delays in refinancing the Thai Bonds due to the COVID-19 pandemic outbreak and unfavourable operating conditions of IECL's bio-ethanol plant in Thailand.

The Group intends to allocate RM5.40 million as full payment of the coupon of the Thai Bonds for the period from May to November 2021, which was due on 18 November 2021. The payment of the outstanding coupon payment is an interim measure undertaken by KNM to resolve the Non-Payment Event. As for the repayment sum of the principal payments of the Thai Bonds of THB2,780 million (equivalent to approximately RM352.57 million), KNM is in the advanced stages of discussions with several financial institutions to secure new financing facilities to redeem the principal sums of the Thai Bonds. However, the final approval/decisions of these new financing facilities are expected to occur only after the maturity date of the Thai Bonds. In addition, KNM has also appointed relevant consultants to monetise the investments of KNM, including disposal of assets / shares in IECL. KNM is also currently in close communications with CGIF on KNM's ongoing refinancing plans to address the Non-Payment Event and where applicable, to reimburse CGIF the guaranteed amount paid by CGIF to the bondholders of the Thai Bonds. Under the guarantee agreement dated 17 November 2016 entered into between CGIF and the Bank of Ayudhya Public Company, Limited (as the bondholders' representative for and on behalf of all bondholders of the Thai Bonds), the bondholders of the Thai Bonds have the rights to make a demand for payment of the guaranteed amount from CGIF within the demand period in the event that the Non-Payment Event is continuing after the abovementioned grace periods.

However, in the event that KNM is not able to fulfil its payment obligations of the Thai Bonds by the above deadlines, it will result in a default in payment by KNM. In such an event, the Board of KNM would be required to provide a solvency declaration to Bursa Securities, failing which KNM will have triggered the criteria under Paragraph 2.1(f) of Practice Note 17 ("PN17") of the Listing Requirements.

Note:

On 16 June 2021, Bursa Securities further announced that it has granted an 18-month relief period for a listed issuer that triggers the criteria under Paragraph 2.1(f) of PN17 of the Main LR ("Suspended Criteria") between 1 July 2021 and 31 December 2021. Such listed issuer will not be classified as a PN17 listed issuer during this period.

1. The Group intends to utilise up to RM24.60 million of the proceeds raised to repay its other outstanding bank borrowings, which comprise mainly bank overdrafts, banker's acceptances, bill payables, revolving credit, term loans, coupon payments on bond issuance and hire purchase. Based on the average annual interest rate of 5.5%, the repayment of bank borrowings amounting to RM24.60 million is expected to result in an annual gross interest savings of approximately RM1.35 million per annum to the Group. However, the repayment priority of the above bank borrowings has not been determined

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