Dayang Enterprise Holdings Bhd is proposing to restructure its debt with an RM682.5 million sukuk issuance.

From the money raised, RM365 million will be advanced to its subsidiary Perdana Petroleum Bhd to settle the latter’s existing borrowings.

“Upon completion of the aforesaid advance, Perdana is expected to have a total debt of RM645.66 million owing to Dayang,” the group said in a stock exchange filing today.

Dayang, which owns a 60.48% stake in Perdana, will then subscribe to RM455 million worth of redeemable convertible preference shares (RCPS) under a renounceable rights issue that Perdana is proposing to undertake.

This will set off the RM455 million debt that Perdana owes Dayang, both companies said in filings with Bursa Malaysia today.

Dayang said the remaining RM317.5 million raised from its sukuk issue will be used to repay its existing borrowings.

Dayang also proposed a rights issue on the basis of one rights share for every 10 existing shares, and a private placement of 96.48 million new shares, equivalent to 10% of the group’s issued shares.

Assuming a rights issue price of 80 sen per Dayang share, the group expects to raise up to RM77.18 million, of which RM70 million will be used to repay its existing bank borrowings within three months.

“Such part repayment of bank borrowings is expected to result in interest savings of approximately RM6.6 million per annum,” Dayang said.

Meanwhile, the proposed private placement is intended to be placed out to third party investors to be identified at a later date. It is expected to raise some RM109.99 million, of which RM75 million will be used to build up a sinking fund for the proposed sukuk issue.

This will be used to repay part of the principal amount and interest due in the first three years of the sukuk’s tenure, Dayang said.

Of the remaining funds, RM15 million will be used for capital expenditure, while RM17.5 million will be used for working capital, it added.

According to its 2018 financial statements, the group has net borrowings of RM867.4 million with a gearing ratio of 0.77 times. The proposed rights issue and proposed private placement may lower Dayang’s gearing ratio to 0.61 times.

Meanwhile, Perdana hopes to raise as much as RM506 million via its rights issue, which has an illustrative price of 26 sen per RCPS.

The RCPS will have a tenure of 10 years and are convertible into new Perdana shares on a one-for-one basis, Perdana said.

Both parties hope to complete the sukuk issuance and rights issue by the fourth quarter of this year. The proposals are not expected to affect the major shareholders’ holdings of Dayang and Perdana.

Meanwhile, Perdana's gearing is expected to be lowered from 1.37 times currently to 0.18 times after the proposed RCPS and assuming full conversion.

It hopes to raise as much as RM506 million from the proposed issuance, which has an illustrative price of 26 sen per RCPS.

Shares in Dayang rose 2 sen or 1.77% to close at RM1.15 today, leaving the group with a RM1.11 billion market capitalisation.

Meanwhile, Perdana Petroleum edged up one sen or 2.99% to close at 34 sen, giving it a RM268.57 million market value.