FGV Annual Report 2018

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018 302 FGV HOLDINGS BERHAD EXAMINED OUR NUMBERS 45 BORROWINGS (CONTINUED) During the financial year ended 31 December 2017, MSM Malaysia Holdings Berhad ( “ MSMH ” ), a subsidiary of the Group, was not in compliance with certain financial covenants for its Islamic term loans amounting to RM404.7 million. However, MSMH 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 and that the financial covenants would be required to be met for the 12 month period ending 31 December 2018 and all times thereafter but subject to the following conditions: (a) No dividend declaration and/or payment by MSMH without prior written consent from the financier until the financial covenants are complied with; (b) Letter of undertaking from the Group to MSMH to complete the construction of the new sugar refinery in Johor by second quarter of 2018; and (c) MSMH’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 MSMH met all the above conditions as stipulated in the letter of indulgence. Accordingly, the Islamic term loan of RM683.2 million has been classified based on its contractual payment dates as at 31 December 2018. On 19 March 2019, MSMH has received a letter of indulgence from the lender allowing the requirement to comply with the financial covenants to be further deferred until 31 December 2019 subject to the following conditions: (a) No dividend declaration and/or payment by MSMH without prior written consent from the lender until such financial covenants are complied with; and (b) Amendments to payment terms of the loan and other relevant terms and conditions in the loan agreement must be in place and effective by the next payment due on 27 May 2019. Management of MSMH has been in discussions with the lender to negotiate the amendments to the payment period and other relevant terms and conditions of the Islamic term loan agreement. The Directors of MSMH believe that MSMH would be able to finalise the amendments to the Islamic term loan agreement with the lender before 27 May 2019, to meet the conditions as stipulated in the letter of indulgence dated 19 March 2019. The fair value of the Group’s and Company’s borrowings amounts approximates their respective carrying values as the impact of discounting was not significant.