Published on The Edge. 18-03-2008: Litrak may return RM1 per share with debt refinancing plan
I find it so amusing!
- KUALA LUMPUR: Lingkaran Trans Kota Holdings Bhd (Litrak) may return RM1 per share through a capital repayment exercise after it refinances existing debts to free up more cash flow for shareholders, analysts said.
Analysts expect Litrak to undertake a capital repayment exercise after it proposed last Friday the issuance of up to RM1.55 billion in Islamic debt papers under a sukuk programme. The new debt issue is meant to refinance the highway concessionaire’s existing borrowings and redeemable unsecured loan stocks of RM1.2 billion and to fund working capital and other operational purposes.
Analysts said the proceeds from the sukuk bond issue would fully retire Litrak’s existing debts that were taken to fund the construction of the Damansara-Puchong Expressway (LDP). Given the strong traffic flow at the LDP, the sukuk bond issue would allow Litrak to extend the repayment tenure of its debts, while freeing up more immediate cash flow for shareholders.
According to a research note by Aseambankers, Litrak has a total debt of RM819 million as at December 2007. Assuming the entire sukuk programme was drawn up, analysts estimated that Litrak would have a cash surplus of RM726 million, which could potentially be returned to shareholders.
“However, we believe that the maximum surplus amount of RM726 million may not be returned to shareholders in full, with some to be kept for future investments. Ultimately, a capital repayment of at least RM1 per share (or RM492 million in total) is more likely,” it said.
Let's see if I can understand this correctly. What this analyst is suggesting that ultimately Litrak would undergo this Sukuk program and borrow 1.55 billion ringgit, so that it could repay shareholders of at least rm1 per share.
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WOW!
Incredible!
What a wonderful suggestion! Isn't life simply grand?
However, some would simply find it ludicrous! What's the analyst insinuating?
Which sane company would borrow large lump sump of money to return back to shareholders?
Are we really having a super duper early Christmas?
And if what is speculated here is true, my gosh, this simply is the most pathetic way to run a company!
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1 comments:
Well, no offence, but at least in overseas market, this is actually very common for mature infrastructure assets which have demonstrated track record to gear up to repatriate the surplus to shareholders. There are some new products like accredited swaps which proliferates this type of transaction. It simply makes no sense for a asset with a says 30 years concession life to have a 15 years debt tenure -- ideally, it should match it with a 30 years tail debt tenure, if there is enough depth in the debt market. After all, this is an asset-based company, not much upside for shareholders can be gained from operational improvement, if not from financial engineering.
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