Proton raising funds

By THE STAR | 7 June 2016


PETALING JAYA: As Proton gears up to launch the long awaited Perdana flagship model, it is busy raising capital in a move to shore up its battered finances.

DRB-Hicom said yesterday that the Government had agreed to subscribe to 1.25 billion redeemable convertible cumulative preference shares (RCCPS) issued by Proton via GOVCO Holdings Bhd by way of RM1.25bil cash payment.

As part of the deal, Proton is required to come out with a restructuring/turnaround plan that includes the relocation of its Shah Alam plant to the Tanjung Malim plant and a strategic plan for the expansion of its business.

The company is also given one year to seek and identify a strategic and renowned partner who will assist in research and development to become a competitive player in automotive industry at the international level.

Proton is a 100%-owned unit of DRB-Hicom.

“The proposed redeemable convertible cumulative preference shares (RCCPS) issuance will enable Proton to regularise its cashflow and settle the long outstanding balance payable to various local and international creditors/vendors/suppliers,” DRB-Hicom said in a filing with Bursa Malaysia.

“This will also help rebuild the vendors/suppliers’ confidence in Proton,” it added.

To recap, the Cabinet had in April approved a conditional soft loan amounting to RM1.5bil to Proton in which a bulk of that money would be used to pay its vendors.

“Proton group has been experiencing flagging vehicle sales in the recent years and this has affected its cashflow position. Proton group plays a crucial role in the national automotive industry where there are about 12,000 workers directly under it, while about 50,000 are employed under the various vendor companies.

“In cognisance of this, the Government of Malaysia agreed to subscribe to Proton’s RCCPS to provide financial support to the group,” DRB-Hicom said.

Assuming that the RCCPS is exercised into shares, the Government will end up with 79% stake in Proton. DRB-Hicom’s shareholdings in Proton then will be diluted from 100% to about 21%.

In giving the fresh funding, the Government also announced that a taskforce led by Datuk Seri Idris Jala will be set up to ensure that Proton’s transformation plan is successful. The task force will consist of six people, three each from the private and public sectors.

The public representatives of the task force will come from the Finance Ministry, International Trade and Industry Ministry and the Economic Planning Unit. This taskforce will also examine Proton’s past business model to identify the weaknesses within the company and ways to overcome it.

Proton had earlier said the Government’s soft loan would catalyse the company’s turnaround plan, which included the rolling out of three new models this year starting with the Perdana.

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