cont'd - KNM Steel Sdn Bhd

KNM GROUP BERHAD I Annual Report 201289Notes to the Financial Statements (cont’d)16. Loans and borrowings (Cont’d)16.1 The bank overdraft for the Malaysian’s subsidiaries are subject to interest rate at 0.75% (31 December2011: 0.50 % to 1.00%; 1 January 2011: 0.50% to 1.00%) above the lenders’ base lending rate per annumwhilst the bank overdraft for the overseas subsidiaries are subject to interest ranging from 14.52% to24.60% (31 December 2011: 14.52% to 24.60%; 1 January 2011: 13.89% to 26.82%) per annum.The bill payables are subject to interest ranging from 1.23% to 6.25% (31 December 2011: 0.92% to4.50%; 1 January 2011: 0.83% to 3.71%) per annum.In connection with the bank overdraft and trade facilities, the subsidiaries have agreed on the followingsignificant covenants, among others:(i)(ii)(iii)(iv)(v)The Group debt to equity ratio shall not be more than 1.75 (2011: 1.75) times at all times.The ratio of profit before interest and tax to interest expense of a subsidiary shall not be less than2 (2011: 2) times at all times.Not to dispose or divest any of its tangible assets which will materially and adversely affect itsexisting business operation (other than in the ordinary course of business).Not to dispose or divest any of its material subsidiaries.Maintenance of equity to asset ratio of not less than 20% based on latest audited financial statementof a foreign subsidiary, prepared in accordance with the local Generally Accepted AccountingPrinciples in that country.16.2 The secured term loans of the Group and the Company are secured by way of:(i)(ii)Legal charge over the industrial land and buildings of certain subsidiaries.Pledge of the Group’s shares in a foreign subsidiary, including assignment over all dividendpayments arising there from.The secured term loans are subject to interest ranging from 2.69% to 6.33% (31 December 2011: 2.81%to 5.71%; 1 January 2011: 2.54% to 12.68%) per annum.The term loans facility covenants include the following:(i)(ii)The Group’s debt to equity ratio shall not be more than 1.75 (2011: 1.75) times at all times.The annual finance service cover ratio of the Group shall not be less than 1.50 (2011: 1.50) basedon the latest audited financial statement on consolidated basis.16.3 The unsecured term loans of the Group were supported by way of corporate guarantee by the Company.The unsecured term loans were subject to interest ranging from 1.40% to 7.56% (31 December 2011:1.17% to 7.40%; 1 January 2011: 1.09% to 6.46%) per annum.16.4 CP/MTN programme has the following significant covenants:(i)The Group’s debt to equity ratio (DE ratio) shall not be more than 1.75 (2011: 1.75) times at alltimes.(ii) The annual finance service cover ratio (FSCR ratio) of the Group shall not be less than 1.5 (2011:1.5) based on the latest audited financial statement on consolidated basis.