MSM Malaysia Holdings Berhad Annual Report 2019

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019 34 BORROWINGS (CONTINUED) Islamic term loans (continued) On 2 May 2019, the Company had successfully negotiated the amendments to the payment terms and financial covenants with the lender and had agreed revisions to the terms of agreement which include: a) Longer tenure of loan from 8 to 12 years; b) Increase in effective profit rate from 3 months KLIBOR plus 1.3% per annum to 1 month KLIBOR plus 2.5% per annum; and c) Revision to the financial covenants. According to the revised terms, the financial covenants shall be computed based on the Group’s consolidated annual audited financial statement for the financial year ending 31 December 2020 onwards. Accordingly, the Islamic term loan of RM631.7 million was classified based on its contractual payment dates as at 31 December 2019. The Company believes it will be able to meet the required financial covenants based on the projected cash flows as at 31 December 2020. The revision of the terms resulted in a loan modification charge of RM25,559,000 and loan arrangement fee of RM3,270,000. The Company is also assessing various possibilities to negotiate the terms of the Islamic term loan with its lenders following the announcement by the Government of Malaysia on the moratorium repayment period in view of the Covid-19 pandemic, if necessary. Term loan - secured The average interest rates of the borrowings range approximately 6.30% to 6.40% per annum (2018: 5.90% to 6.15% per annum). As at 31 December 2019, the term loan which has a tenure of 30 months (2018: 18 months) are secured against an assignment of proceeds from leasehold agriculture land disposal as disclosed in Note 29 to the financial statements and the Assignment and Charge of the Designated Accounts. As indicated in Note 42 to the financial statements, on 9 April 2020, the Group had issued a letter to F&N Agrivalley Sdn. Bhd. to exercise its rights to rescind the sale and purchase agreement in respect of the disposal of its leasehold agricultural land located at Chuping, Perlis entered on 8 October 2019. Despite the cancellation of the sale and purchase agreement, the Group continues to believe that it will be able to settle its term loan based on its contractual due dates. On 17 October 2019, the Company successfully negotiated the amendments to the payment with the lender incurring arrangement fees of RM547,500. The revision of the terms also resulted in a loan modification charge of RM1,259,000. MSM Malaysia Holdings Berhad | Annual Report 2019 204