MSM Malaysia Holdings Berhad Annual Report 2019

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019 34 BORROWINGS (CONTINUED) Bankers’ acceptance The average interest rates of the borrowings range approximately 3.96% to 4.14% (2018: 3.43% to 4.70%) per annum. Islamic term loans The average interest rates of the borrowings range approximately 4.99% to 5.69% (2018: 4.72% to 4.99%) per annum. The Islamic term loans which have a tenure of 12 years (2018: 8 years) are secured against a leasehold land, debenture and certain bank balances of the Group. The Group and the Company is required to comply with certain financial covenants i.e. consolidated net debt and financing to equity ratio, consolidated net debt and financing to earnings before interest, tax, depreciation and amortisation (“EBITDA”) ratio and consolidated finance payment cover ratio (collectively known as ‘’financial covenants”). The financial covenants are to be complied with annually (2018: semi-annually). During the financial year ended 31 December 2017, the Group and the Company was not in compliance with certain financial covenants for its Islamic term loans amounting to RM406.5 million. However, the Company had received a letter of indulgence dated 3 November 2017 from the lender allowing the requirement to comply with the financial covenants to be deferred until 31 December 2018. The financial covenants were required to be met for the 12 month period ended 31 December 2019, with the first compliance date as 30 June 2019 and all times thereafter but subject to the following conditions: a) No dividend declaration and/or payment by the Company without prior written consent from the financier until the financial covenants are complied with; b) Letter of undertaking (“LOU”) from FGVH to complete the construction of the new sugar refinery in Johor by second quarter of 2018; and c) The Company’s ability to perform all obligations under and comply with all terms and conditions governing the facilities. As at 31 December 2018, the waiver of the financial covenants continued to be effective as the Company met all the conditions as stipulated in the letter of indulgence dated 3 November 2017. Accordingly, the Islamic term loan of RM683.2 million was classified based on its contractual payment dates as at 31 December 2018. On 19 March 2019, the Company received a letter of indulgence from the lender confirming the lender of the Islamic term loan facility had granted a further indulgence and extension of deferment of the imposition of the financial covenants with effect from 1 January 2019 until 31 December 2019, subject to the following conditions: a) no dividend declaration and/or payment by the Company without prior written consent from the lender until such financial covenants are complied with; and b) amendments to payments of the loan and the other relevant terms and conditions in the loan agreement must be in place and effective by next payment due on 27 May 2019. 203 FINANCIAL STATEMENTS 08