1. The Government has agreed to approve the soft loan of RM1.5 billion to ensure that PROTON remains sustainable as a national carmaker, providing jobs for 12,000 direct employees and another 50,000 employees along the local automotive supply chain.
2. However, the Government’s role is not to turn around PROTON nor take over PROTON’s Management but instead to assist it in ensuring the conditions imposed for the financial assistance are met.
3. For this purpose, the Government has decided to subscribe to RM1.25 billion of new redeemable convertible cumulative preference shares (RCCPS) in PROTON through GOVCO (100% owned by MoF Inc). This funding is part of the RM1.5 billion soft loan that was agreed to be awarded to the national carmaker back in April 2016.
4. There has been speculation that such arrangement would ultimately mean that the RCCPS may be converted into ordinary shares, thus making the Government the controlling shareholder of PROTON with a 79.3% stake in the Company.
5. I would like to stress that the Government has no intention to convert the RCCPS into ordinary shares in PROTON. The Government is not taking over PROTON. PROTON remains a fully private company and its Management is fully responsible for its business decisions.
6. The RCCPS with equity features is the fastest method to address PROTON's current financial problems since the company is in dire need of liquidity to pay its vendors.
7. Based on the subscription agreement signed between GOVCO and Proton, there are several terms and features of RCCPS that are punitive enough for PROTON to convert into ordinary shares.
8. The Government hopes that PROTON will be able to improve its financial result in the next 5 years. After a grace period of 5 years, PROTON needs to pay the cumulative dividends (year 1-5) at 4% per annum as well as the repayment of the RCCPS. It is therefore crucial for PROTON to find a strategic partner and to implement its turnaround plan that would be closely monitored by the Task Force.
Dato’ Sri Mustapa Mohamed
9 June 2016
Question: Why did the Government choose the RCCPS route?
Based on audited account of 31 March 2015, total long term borrowing of PROTON stood at RM847 million. Therefore, should the Government propose to give loan/subordinated loan to PROTON, the company’s existing lenders consent would be required and the process will take a long time which will further delay the crisis faced by the PROTON vendors.
In addition, there is a possibility that existing lenders will request for early retirement of their loan. As a result, the Government decided to opt for the RCCPS with equity features and using GOVCO to subscribe PROTON’s RCCPS.
Question: Why is the RCCPS features considered to be punitive?
The punitive terms and features of the RCCPS agreed upon by GOVCO and PROTON are as follows:
- Conversion price was set at RM0.87 per ordinary share of which should PROTON decide to convert, the Government will receive
RM0.87 per ordinary shares. The current net tangible asset (NTA) per share of PROTON is RM1.86 per share.
- Inclusion of non-dilution clause where the Government is protected should PROTON secure dilutive financing below agreed conversion price (i.e. RM0.87).
- No dividend/shareholders advance should be declared or paid by PROTON as long as the RCCPS is still outstanding.
Question: What if PROTON does not pay the dividends and repay the RCCPS?
Should PROTON be unable to redeem the RCCPS and pay the outstanding dividend, then PROTON has an option to convert into ordinary shares with agreed conversion ratio of 1:1.152.
Last Updated 2016-06-13 07:31:53 by Azuna Hasbullah atau Abd Rahman