MARC has issued this rating update in relation to KNM Group Bhd’s (KNM Group) announcement on a proposed rights issue and foreign currency exchangeable bonds issue which are earmarked for KNM Group’s potential future acquisitions and working capital. In addition to the above, MARC also notes a proposed bonus issue exercise. MARC is of the opinion that there is no immediate impact on the AA- ID/MARC-1ID ratings of KNM Capital Sdn Bhd’s (KNMC) RM300.0 million Murabahah Underwritten Notes Issuance Facility / Islamic Medium-Term Notes (MUNIF/IMTN) and its stable outlook. KNMC is a wholly-owned subsidiary of KNM Group and serves as the Group’s centralized funding and treasury vehicle.

KNM Group is an investment holding company with subsidiaries principally involved in the design, manufacture and fabrication of a diverse range of process equipment used in the oil, gas, petrochemicals and minerals processing industries. Over the years, KNM Group’s vertical integration into the higher-end segment of process equipment market was achieved mainly via strategic acquisitions and successful joint ventures. Since 2003, KNM Group has strengthened its overseas presence namely in Oceania, Asia, North and South America, Europe and North African. Both its wholly owned subsidiaries, KNM Pty Ltd (KPL) and FBM Hudson Italiana Spa (FBM), which were acquired in FY2006, have allowed KNM Group to move further up the value chain, evident from more than one-third contribution to the Group’s revenue in FY2006, mostly in the high premium product segment.

MARC will closely monitor the developments and review their impact on the ratings once there is more clarity regarding the longer-term impact of pending acquisitions on the business and financial profile of the Group.