“Please name the financial institution that is prepared to do that,” said Ravindrasingham Balasingham, the group’s managing director and CEO.

“If the idea is to use the cash flows of Borsig Group to pare down KNM’s debt, then current creditors will immediately seize Borsig, along with all other assets of KNM.”

Acquired in 2008, Borsig, a renowned German machinery and equipment company valued upwards of €300 million (RM1.5 billion), is the prized jewel in KNM’s stable. Even the senior management of Borsig are threatening to resign if there is change to the current board of directors of KNM Group Bhd, Ravindrasingham said.

On Friday, German tycoon Andreas Heeschen and shareholders aligned to him issued a statement setting out a proposal to issue a €110 million (RM550 million) bond to European institutional investors.

“We will use certain collateral of KNM’s assets and begin paying back creditors within 90 days of taking over the board,” the statement said, adding that after the bond is issued, a shareholder capital increase estimated at up to RM600 million will be placed.

Ravindrasingham, however, told FMT Business the proposal was nothing more than “pie in the sky”.

He warned that the additional debt proposed by Heeschen’s camp was “ludicrous and unbelievable” and would bring “disastrous consequences to a group already in financial distress”.

“As it is, KNM is already struggling to meet its current debts and interest payments,” he said. “Any new debts raised at a time of high interest rates (like at present) will be extremely high for a group like ours, which is in financial distress and facing winding-up petitions.

“The restraining order runs out in two months – December 2023. KNM Group Bhd can only survive if the majority of creditors support us, and we have that. Moreover, the creditors have stated that they will seize the assets they have as security if there is a change in management. It will be game over in that case for the current shareholders. Who stands to win?”

He also said an increase in KNM’s paid-up capital would not be in the best interests of shareholders who would see their shareholding diluted.

“It is a commonly used strategy to completely take over a company at a deep discounted price by pushing the mother share price down beforehand. This is not in the interest of all shareholders, but only those in control at that time and willing to take the risk and with the cash. It will need regulatory approval and will take time. (A sum of) RM600 million is above the current market value of KNM Group Bhd, which is around RM486 million,” he said.

Ravindrasingham said an informal session held with creditors on Friday suggested that they were unlikely to be swayed by the team pushing to take over KNM. He said the creditors demanded inserting a condition into the scheme of arrangement (SOA) that they will exit the proposed draft SOA if there is a change on the board of directors of KNM Group Bhd.

“The creditors present have given a clear indication that they support the current management and are confident it can secure the High Court’s approval for a scheme of arrangement which will be proposed at a court-convened creditors’ meeting to be called soon,” he said.

He said those present, which form a majority of the creditors of the group, remain “fully supportive” of the present board, led by non-executive chairman Tunku Yaacob Khyra, and its management.

Tunku Yaacob is KNM’s largest shareholder with a 9.5% indirect stake in the company as of Oct 6.

“During the discussions, it became clear that various stakeholders who are unhappy with changes being sought to the board and the management may pursue the liquidation of the group under the SOA,” said Ravindrasingham.

He said KNM’s current board members and management also have the full support of their Borsig counterparts, as well as that of Sarawak businessman Mahmud Abu Bekir Taib.

Mahmud, son of Sarawak governor Abdul Taib Mahmud, emerged as a substantial holder earlier this week after acquiring a 5.03% stake in the group.

KNM is scheduled to hold its extraordinary general meeting tomorrow.

The EGM was called by a notice of requisition issued on behalf of Heeschen, who has an 8.25% deemed interest in KNM as of Oct 10.

It seeks to replace Tunku Yaacob with Johor princess Tunku Kamariah Sultan Iskandar, and Ravindrasingham with Edwin Silvester Das.

Heeschen himself is looking to replace Zulhasnan Rafique on the board.

The other changes sought are:

• Zaidi Mat Isa @ Hisham for Yee Hong Ho;
• Former KNM employee William H Van Vliet III for Steve Ho;
• Former executive director Flavio Porro for Thulasy Suppiah; and
• Ghani Yusof for Uwe Ahrens.

On Thursday, the company announced that it had, together with indirect wholly owned subsidiaries Deutsche KNM GmbH and Borsig GmbH, launched a RM17 million lawsuit against Porro and another executive director, Terence Tan.

In a statement issued earlier, MAA Group Bhd, another substantial shareholder in KNM, said it would oppose the resolution.