EON Cap plans RM1bil fund-raising exercise

Friday June 26, 2009
EON Cap plans RM1bil fund-raising exercise

It hopes to raise at least RM500mil from the Tier 1 capital programme

KUALA LUMPUR: EON Capital Bhd has submitted an application to raise RM1bil in Tier 1 capital, barely a week after Bank Negara rejected the group’s plan to sell new warrants to shareholder Primus Pacific Partners LLC for RM29.5mil.

“We hope to raise at least RM500mil from the RM1bil innovative Tier 1 capital programme,” chairman Tan Sri Syed Anwar Jamalullail told reporters after the group’s AGM yesterday.

He said the proposal on the fund-raising programme was submitted to the Securities Commission yesterday.

EON Cap director Rodney Ward said the group’s current core capital ratio would strengthen to just below 11% from the current 9.7% with the additional RM500mil in fresh funds from the upcoming issue.

“We don’t want the bank to be over-capitalised,” Syed Anwar said when asked why the bank planned to raise just half the proposed amount.

Ward explained that the innovative Tier 1 capital raising programme was a special investment instrument designed to appeal to long-term investors. EON Cap has appointed CIMB Bank Bhd and its own unit MIMB Investment Bank Bhd to develop the instrument.

Recently, some analysts opined that EON Cap has ample room to raise as much as RM1.5bil in Tier 1 capital to shore up its working capital.

Ward said the bank would also continue to look at other capital raising options, but was “not under the gun to do so” at this moment.

EON Cap’s capital position was put under the microscope after Bank Negara rejected the proposed sale of new warrants to Primus last week without disclosing the reasons behind the decision.

Syed Anwar said that the amount to be raised from the warrants sale was small, and would only improve the bank’s core capital ratio by 0.15% if the issue were to go through.

Assuming the warrants were fully converted into EON Cap shares, Primus’ stake would increase to 26.4% from 20.2% currently.

Primus was reported to be appealing against the decision by Bank Negara.

On another note, Syed Anwar said the group had narrowed the candidates to lead the bank following the retirement of former chief executive officer Albert Lau in April.

“We hope to appoint one before the end of the year,” he said.

Syed Anwar said consumer loans at the bank grew at a steady rate of 6% so far this year, although corporate lending activities showed a contraction due to the sharp decline in trade finance.

The group’s asset quality showed some deterioration in the first quarter, mainly due to “two loans” that were being restructured.

“In the current quarter, asset quality has improved, while at the same time we have also expanded our loan recovery unit,” he said.

http://biz.thestar.com.my/news/story.asp?file=/2009/6/26/business/4196919&sec=business