Khee San reveals regularisation plan, seeks for scheme of arrangement with creditors

KUALA LUMPUR (May 9): Practice Note 17 (PN17) company Khee San Bhd has announced its regularisation plan, which includes share capital reduction, issuance of renounceable rights shares with free warrants and a scheme of arrangement with its creditors.

In a bourse filing on Tuesday (May 9), the candies and sweets manufacturer said the share capital reduction entails the cancellation of RM100.97 million of its issued share capital to set off its accumulated losses.

Besides the share capital reduction to offset its accumulated losses, Khee San has also proposed a scheme of arrangement with creditors in respect of the amounts owing to the scheme creditors, aggregating RM138.47 million as at March 31, 2022.

Khee San also proposed a seven-for-one renounceable rights issue priced at 10 sen each, coupled with free warrants to raise between RM55 million under the minimum scenario and RM96.10 million under the maximum scenario.

The fund raised through the rights issue will mainly be used to settle the amounts owed to the scheme creditors, and to fund its working capital and capital expenditure requirements, said Khee San in the filing.

The free warrants will be issued on the basis of four warrants for every seven rights shares subscribed, whose exercise price is also fixed at 10 sen each. The exercise will involve the issuance of renounceable right shares of up to 960.96 million units and up to 549.12 million warrants.

It also plans to establish an Employees Share Scheme (ESS) of up to 15% of Khee San’s issued share capital for its eligible directors and employees.

“The proposed regularisation plan serves to regularise the financial condition of the group and to return the group to profitability. Through the proposed regularisation plan, the group would be able to strengthen its cashflow position via the proposed rights issue with warrants, which would in turn augur well for the group’s ongoing plan to revitalise its business operations,” it noted.

In November 2021, Khee San slipped into PN17 status after its wholly owned subsidiary Khee San Food Industries Sdn Bhd was placed under judicial management, following an application by Maybank Islamic Bhd to put the unit under court-supervised restructuring.

The assets of its unit accounted for over half of the total assets employed by the company on a consolidated basis.

The proposed regularisation plan, which is subject to approvals from Bursa Securities, scheme creditors and Khee San’s shareholders, will be submitted to Bursa Securities within two months from Tuesday.

Khee San has reported losses in recent years. The company posted an annual net loss of RM58.3 million in FY2021 and narrowed to a net loss of RM13.7 million in FY2022, despite revenue shrinking to RM32.95 million, from RM59.55 million during the same period.

The lower net loss was mainly due to lower administration expenses, which reduced substantially to RM12.76 million in FY2022, from RM74.16 million in FY2021.

Nonetheless, for the cumulative six-month ended June 30, 2023, Khee San managed to eke out a net profit of RM88,000, versus a net loss of RM4.49 million a year ago, as revenue expanded to RM28.55 million, from RM18.65 million.

Shares in Khee San rose one sen or 5.88% to settle at 18 sen on Tuesday, giving the group a market capitalisation of RM25 million.