cont'd - KNM Steel Sdn Bhd

90KNM GROUP BERHAD I Annual Report 2012Notes to the Financial Statements (cont’d)16. Loans and borrowings (Cont’d)16.4 CP/MTN programme has the following significant covenants: (cont’d)(iii)Not to declare or pay any dividend or make any distributions whether income or capital in natureto its shareholders in the event that:-(a)(b)a breach of financial covenant would occur if such payment is made; oran event of default has occurred and is continuing or following such payment, an event ofdefault would occur.(iv)First legal charge over the Syariah compliant Designated Accounts and monies standing therein.The CP/MTN are subject to profit rates ranging from 3.80% to 6.00% (2011: 3.80% to 5.80%) per annum.The Group DE Ratio and annual FSCR Ratio are calculated for each financial year based on the latestaudited financial statements of the Group on a consolidated basis. In the event the FSCR Ratio fallsbelow 1.50 times, the Issuer shall remedy the breach within one (1) month period, failing which it will beconsidered an event of default.16.5 Revolving credit of the Group granted by the licensed banks has the following significant covenants:(i)(ii)(iii)The Group debt to equity ratio shall not be more than 1.75 (2011: 1.75) times at all times.The Group consolidated debt to EBITDA ratio shall not exceed 5 (2011: 3.5) times at all times.The debts service cover ratio of the Group shall not be less than 1.5 (2011: 1.5) computed on biannualbasis (in ending June and Dec).(iv) The finance service cover ratio (FSCR ratio) of the Group shall not be less than 1.5 (2011: 1.5)computed semi annually based on half yearly financial statements and annual audited financialstatement.The revolving credits were subject to interest ranging from 4.47% to 6.00% (31 December 2011: 2.19%to 5.00%; 1 January 2011: 1.98% to 4.18%) per annum.16.6 Covenants EventsFor the reporting period ended 31 December 2012, the Financial Service Cover Ratio and the DebtsService Cover Ratio fell short of the prescribed financial covenant ratios. In order to rectify the situation,subsequent to the financial year end, the Company and certain subsidiaries have successfully obtainedindulgence/waiver from the affected lending institutions.The Group continues to engage its financiers to regularise the shortfall in the prescribed financial covenantratio including rebalancing the maturity profile of its loan portfolio.As at the issue date of this financial statements, there were no indications or incidences of “defaultnotice” having been served or demand of accelerated payment has been made by the financiers to theCompany or its subsidiaries as a result of the covenant shortfall.