By MARK RAO / Pic By MUHD AMIN NAHARUL

DRB-Hicom Bhd will create an asset pool to serve as collateral for the remaining RM1.2 billion preference shares held by Govco Holdings Bhd in its automotive unit Proton Holdings Bhd (PHB).

The conglomerate in a statement said the RM300 million purchase of the first tranche of redeemable convertible cumulative preference shares (RCCPS) and the subsequent RM50 million dividend entitlement in PHB from the 99.9% Ministry of Finance Inc (MoF) owned Govco was completed last week.

Govco, which still retains RM1.2 billion worth of preference shares in PHB, has executed an asset exchange agreement with DRB-Hicom whereby the latter is to create an asset pool comprising landed properties, designated shares or cash.

Under the agreement, Govco has the right to acquire the asset pool if the remaining preference shares are left unredeemed upon the June 6, 2031 expiry date.

DRB-Hicom is the majority shareholder in Proton after selling a 49.9% stake in the national automaker to Zhejiang Geely Holding Group Co Ltd. The deal was completed last week.

It said Govco will be allowed to register private caveats on all landed properties of the asset pool, while guaranteeing that no encumbrance shall occur in relation to any asset exchange.

“We shall at all times maintain the asset pool’s market value to be at least equal in value to the aggregate redemption value of the principal tranches of the RCCPS held by Govco,” the company added.

The conglomerate is also required to inject more assets into the pool if the force sale value of the assets is under the aggregate redemption value of the principal tranches of the RCCPS held by Govco as of Nov 30, 2030, maintaining the market value at 1.25 times of the RCCPS.

DRB-Hicom also retains the right to replace individual assets from the pool with other similar assets and may withdraw individual assets provided the market value is in accordance with the aforementioned conditions.

Under the initial agreement reached in June this year, non-redemption of the RCCPS would allow Govco to liquidate assets owned by DRB-Hicom to meet the difference of the unredeemed preference shares.

The asset-exchange agreement has now replaced this condition.

In a separate filing on the same day, DRB-Hicom said its wholly owned subsidiary Perusahaan Otomobil  Nasional Sdn Bhd (PONSB) received a RM1.1 billion reimbursement grant for its research and development (R&D) activities.

The government grant will reportedly aid both PHB and PONSB in achieving a stronger credit position to fund future growth and expansion plans.

“PONSB intends to fully settle its (RM525 million) syndicated loan facility and thereafter help Proton to partly settle its shareholders’ advance due to DRB-Hicom from the remaining funds of the R&D reimbursement grant of RM1.1 billion,” the conglomerate said.

The syndicated loan facility comes with an estimated accrued interest of RM8.3 million.