MBSB Bank Bhd has withdrawn its originating summons against KNM Group Bhd’s indirect unit, Perwira Awan Sdn Bhd, in relation to a RM116.13 million Islamic financing facility default. After negotiations, the discontinuation was filed with liberty to file afresh, marking a pivotal moment in KNM’s ongoing restructuring journey. KNM also disclosed that MBSB has expressed support for KNM’s restraining order application intended to shield the group from active creditor litigation during its restructuring process, while KNM signals plans to seek an extension of the restraining order. The developments come amid KNM’s broader strategy to streamline assets and secure creditor backing as it navigates debt pressures. KNM’s management framed the withdrawal as a positive step that underscores trust and collaboration with creditors as the group pursues a fair and balanced resolution for all stakeholders. The case also sits within KNM’s wider corporate actions, including efforts to dispose of non-core or loss-making subsidiaries and pursue strategic buyers for critical assets to shore up liquidity and salvage profitability. The market reaction to KNM’s evolving restructuring plan has been cautious, with KNM’s stock price hovering near a record low even as the group advances discussions with creditors and potential buyers for key units.
Background and Context
KNM Group Bhd (KL:KNM) has long been operating under a Practice Note 17 (PN17) designation, reflecting its status as a financially distressed entity that continues to restructure debt and reorganize operations. In this environment, lenders and creditors play a central role in determining the pace and shape of recovery, while court protections such as restraining orders can provide breathing room during negotiations. The RM116.13 million Islamic financing facility in question was extended to Perwira Awan Sdn Bhd, an indirect unit within KNM’s corporate group. Perwira Awan Sdn Bhd has been a focal point in creditor discussions due to its involvement in the related financing arrangement and the subsequent actions seeking to satisfy outstanding debt obligations through collateral or other enforcement mechanisms.
On March 25, MBSB Bank Bhd served its originating summons against Perwira Awan Sdn Bhd, with the primary aim of enabling the auction or enforcement of collateralized assets to recover the outstanding balance tied to the RM116.13 million facility. The enforcement interest centered on land in Kuantan owned by Perwira Awan Sdn Bhd, which had been identified as a potential asset to realize value and address the outstanding debt. By April 4, 2025, a notice of discontinuation was lodged, revealing that MBSB had chosen to withdraw the summons in light of ongoing negotiations. Crucially, the discontinuation was filed with liberty to file afresh, preserving the bank’s right to pursue the matter again should negotiations fail or new terms arise.
KNM’s public statements tied the withdrawal to a broader dialog with creditors and the evolving restructuring program. The company emphasized that MBSB’s withdrawal occurred within a context of continued cooperation, highlighting the bank’s expressed support for KNM’s restraining order (RO) application. The RO is intended to protect KNM from additional creditors’ actions during restructuring, giving the group time to implement its turnaround plan. KNM’s leadership has reiterated that creditor backing is essential to achieving a sustainable resolution that can restore profitability and ensure long-term viability.
This sequence of events sits against KNM’s broader corporate strategy, which includes selling non-core or underperforming subsidiaries to raise capital, reduce debt, and refocus on core earnings drivers. In February, KNM announced a €270 million (RM1.26 billion) deal to sell Deutsche KNM GmbH, the German unit that houses the holding entity of its principal earnings contributor, Borsig GmbH. This move underscores KNM’s commitment to streamlining the group’s portfolio and monetizing assets that can strengthen liquidity and drive value for creditors and shareholders alike. At the same time, KNM has indicated its intention to seek buyers for FBM Hudson Italiana SpA, its loss-making Italian subsidiary, after two failed attempts previously, signaling an ongoing challenge to restructure legacy assets while protecting the core business.
KNM’s stock market performance has reflected investor concern about the group’s debt burden and the execution risk surrounding its restructuring. Its share price closed at a record low of 3.5 sen on a recent trading day, translating to a market capitalization of approximately RM114.61 million. Over the past year, the KNM counter has declined by more than 53%, signaling that investors remain wary about the pace and likelihood of a successful turnaround. The market activity around KNM underscores the importance of credible asset sales, timely debt resolution, and transparent communication with creditors to rebuild confidence and support a sustainable recovery path.
MBSB’s involvement in the case is not unusual for a bank with a substantial exposure to the group’s borrowings. The bank’s actions to auction the Kuantan land to satisfy the RM116 million debt were a core element of the initial enforcement effort, illustrating the lengths to which lenders may go to recover funds amid restructuring discussions. The withdrawal, however, indicates a potential shift in leverage dynamics as KNM seeks to negotiate terms that could be more favorable or more implementable within a broader restructuring framework. The bank’s decision to withdraw points to a willingness to engage constructively with KNM’s management, a crucial factor in enabling a consensual resolution and in preserving value for all creditor classes.
The KNM Group’s situation is further complicated by its PN17 status, which reflects ongoing concerns about financial viability and the ability to meet regulatory and equity obligations. In a PN17 context, the company must demonstrate steps toward revival and meaningful creditor engagement to avoid delisting or more stringent regulatory interventions. The interplay between PN17 status, the restraining order, and ongoing asset disposals forms a complex matrix of governance, financing, and risk management that will shape the group’s near-term trajectory. The withdrawal of the MBSB summons is a notable event within this matrix, as it may pave the way for more collaborative creditor negotiations and a clearer path to the restructuring objectives.
Withdrawal of the Originating Summons: Details and Implications
The withdrawal of the originating summons filed by MBSB Bank Bhd against Perwira Awan Sdn Bhd represents a tactical shift within KNM’s broader restructuring narrative. The originating summons, originally filed to enable enforcement actions against Perwira Awan, including the potential auction of the Kuantan land to satisfy the RM116.13 million Islamic financing facility, has now been discontinued. The move, executed on April 4, 2025, was explicitly made “with liberty to file afresh,” preserving MBSB’s option to reinitiate the suit should negotiations fail or new financial terms become necessary.
From a legal and strategic standpoint, the discontinuation with liberty to refile signals several important implications. First, it affords both KNM and MBSB a window to re-engage in settlement discussions without the immediate pressure of ongoing enforcement proceedings. This breathing space can be valuable in a restructuring context, where timing and sequencing of debt resolution are critical to preserving enterprise value and avoiding disruption to operations. Second, the “liberty to file afresh” clause ensures that the bank retains leverage if dialogue collapses, so the withdrawal does not equate to a permanent concession by the lender. Rather, it keeps the door open for renegotiation under potentially revised terms, collateral structures, or repayment schedules that align with KNM’s restructuring plan.
The impact on Perwira Awan Sdn Bhd, the borrower in this arrangement, is also noteworthy. The absence of immediate enforcement pressure reduces the risk of asset disposition under duress in the short term, allowing management to focus on operational stabilization and the execution of the broader corporate blueprint. For KNM as a parent group, the withdrawal can buy time to pursue its strategic assets reallocation without the distraction of ongoing court action by a key lender. It aligns with KNM’s stated aim of securing a fair and balanced resolution that considers the interests of all stakeholders, including other creditors who may be exposed to the group’s evolving strategic plan.
Additionally, the withdrawal dovetails with KNM’s public stance on the RO application that seeks to shield the company from creditor actions during the restructuring process. The company has emphasised that this RO—once approved by the courts—would provide a defined period during which KNM can implement its turnaround plan without immediate legal pressure. The combination of a suspended enforcement environment and a secured RO can significantly improve KNM’s ability to execute asset sales, debt restructuring, and workforce optimization without the volatility of ongoing litigation. The net effect is a more controlled and potentially faster path toward liquidity restoration and profitability when paired with the monetization of key assets.
In this context, the withdrawal might also influence creditor sentiment more broadly. If KNM can demonstrate constructive engagement, credible restructuring milestones, and tangible progress in asset dispositions, creditor confidence can improve, encouraging a collaborative approach to restructuring terms, including potential debt haircuts, extended maturities, or targeted refinancing. The management team’s role in maintaining open dialogue is critical in these circumstances, as is the ability to translate negotiation outcomes into executable action plans that align with the RO’s protections and the PN17-imposed discipline.
From a governance perspective, the withdrawal emphasizes the importance of transparent communication with investors and the market. KNM’s disclosure that MBSB had withdrawn the originating summons following negotiations, and that MBSB has shown support for the RO, serves to reassure the market that discussions are proceeding with a sense of cooperation rather than confrontation. The tone set by KNM’s leadership—focusing on fair treatment of stakeholders, trust, and collaboration—is intended to bolster credibility and support, both among creditors and potential buyers or strategic partners who may be considering participation in KNM’s restructuring journey.
One element that remains critical is the status and trajectory of KNM’s broader asset monetization efforts. The company has indicated its intention to pursue strategic disposals, including the sale of the German unit Deutsche KNM GmbH to NGK Insulators Ltd, a move valued at €270 million (RM1.26 billion). The sale is significant because Deutsche KNM GmbH houses the holding company of Borsig GmbH, KNM’s main earnings contributor, which underscores the potential impact on the group’s profitability and cash flow. Separately, KNM is seeking buyers for FBM Hudson Italiana SpA, its loss-making Italian subsidiary, after a third failed attempt, signaling persistent challenges in disposing of legacy assets while preserving core enterprise value.
The combination of these asset monetization efforts, the RO, and the withdrawal of the MBSB summons provides KNM with a multi-pronged platform for moving forward. If successful, these measures could improve liquidity positions, reduce debt service obligations, and strengthen KNM’s ability to invest in core operations. However, the execution timeline, regulatory approvals, and negotiations with multiple creditors will determine how quickly and effectively such outcomes can be realized. In this complex environment, the KNM management team’s ability to coordinate asset sales with creditor approvals and RO conditions will be critical in achieving a durable, value-enhancing resolution.
Restructuring Strategy, Creditor Cooperation, and Management Perspective
KNM’s ongoing restructuring strategy centers on balancing creditor cooperation with asset rationalization and targeted disposals. The company’s leadership has emphasized the importance of creditor trust and collaboration as a foundation for a fair resolution that protects the interests of all stakeholders, including minority shareholders, employees, suppliers, and customers. The management team has framed the RO as a vital instrument that could shield KNM from immediate creditor action, allowing the group to focus on implementing a comprehensive turnaround plan. The ratio of risk management to strategic investment is being recalibrated to ensure that critical operations remain solvent while non-core assets are evaluated for monetization.
Ravindrasingham Balasingham, KNM Group’s CEO, highlighted the significance of creditor support in the company’s survival and eventual return to profitability. He described the current environment as one where the trust and collaboration between KNM management and creditors are essential to achieving a fair and balanced resolution. His remarks underscore the belief that a mutually agreeable restructuring framework—supported by active participation from creditors—can unlock value that would otherwise be unattainable in a purely adversarial setting. The management’s emphasis on collaboration reflects a broader industry awareness that successful corporate turnaround in PN17 contexts hinges on credible commitments to reform, discipline, and transparent governance.
A critical aspect of the restructuring story is the role of the RO in safeguarding the process. By seeking a court-ordered protection against legal actions during the restructuring, KNM aims to create a stable operational environment that reduces the risk of opportunistic creditor actions, preserves assets for potential monetization, and provides a clear timeframe for implementing strategic measures. The RO can help synchronize the timing of asset disposals with the reallocation of capital and the settlement of debts, increasing the likelihood that future revenue streams can be redirected toward growth initiatives or debt reduction.
Asset sales are at the core of KNM’s value-creation plan. The €270 million sale of Deutsche KNM GmbH to NGK Insulators Ltd represents a major step in rationalizing the German business and concentrating earnings power around the group’s strongest units. Borsig GmbH, as the main earnings contributor within Deutsche KNM GmbH, underscores why the sale is strategically important. If the deal proceeds as proposed, KNM could realize a significant infusion of cash that improves liquidity and reduces leverage. The company’s efforts to divest FBM Hudson Italiana SpA—despite prior unsuccessful attempts—signal a disciplined willingness to re-engage with strategic buyers and to pursue best-fit outcomes for each asset.
The broader market implications of these actions are meaningful for KNM’s stakeholders. For lenders, progress on asset disposals promises a clearer path to debt reduction and improved recoveries, even if terms require complex negotiations and longer settlement periods. For investors, credible progress, particularly a well-structured RO and timely asset monetizations, could contribute to a more favorable assessment of KNM’s turnaround potential. For employees and suppliers, the restructuring’s stability and predictability matter, as orderly adjustments can help preserve operations and preserve contractual relationships critical to KNM’s ongoing business activity.
From a governance perspective, KNM’s actions also reflect a careful alignment of strategic priorities. The group’s leadership has repeatedly stressed the need to protect core assets, optimize operations, and pursue value-enhancing disposals while maintaining a respectful and cooperative relationship with creditors. This approach aims to minimize disruption to business operations and to maintain business continuity across KNM’s global footprint, including its significant German operations and the Italian subsidiary. The interplay between asset sales, RO protections, and ongoing negotiations will shape how KNM’s restructuring unfolds over the coming quarters, as it seeks to emerge from PN17 status with stronger balance sheets and improved profitability.
Asset Disposals, Financial Health, and Market Signals
The asset monetization program at KNM is central to restoring financial health and stabilizing the group’s long-term prospects. The €270 million deal to sell Deutsche KNM GmbH to NGK Insulators Ltd stands as a landmark element of the plan, with the potential to unlock substantial liquidity by transferring ownership of a major earnings contributor, Borsig GmbH, to a new owner. This strategic move reduces exposure to underperforming segments while reinforcing the balance sheet with cash that can be deployed toward debt repayment and operational investments that support profitability.
In tandem with the German disposal, KNM has signaled ongoing efforts to divest FBM Hudson Italiana SpA, the Italian subsidiary that has struggled with losses. This third attempt to sell the entity indicates KNM’s commitment to shedding non-core or loss-making assets, even as it faces execution risk and market headwinds in cross-border asset transactions. The decision to pursue buyers, even after previous failed efforts, underscores a willingness to persevere in asset rationalization and to pursue opportunities that offer sustainable value creation for creditors and shareholders.
The market response to KNM’s restructuring initiatives has been cautious. The stock’s closing price of 3.5 sen and a market capitalization of RM114.61 million reflect a market that remains concerned about the company’s ability to reverse its negative trajectory. The more than 53% decline over the preceding year signals ongoing risk and skepticism about the success of the turnaround plan in the near to medium term. Investors and market watchers will be watching closely how the RO, the pace of asset disposals, and the terms of any debt restructurings unfold, as these elements will determine the magnitude and speed of improvements in liquidity and profitability.
KNM’s immediate strategic priorities include finalizing the RO approval, stabilizing operations, and accelerating the monetization of key assets. If the RO is granted and asset sales progress on schedule, KNM could achieve a measurable improvement in liquidity that supports debt reduction and working capital optimization. Conversely, delays in RO approval or setbacks in asset sales could sustain a period of financial stress and limit the group’s ability to deliver on restructuring milestones. To strengthen the case for recovery, KNM will need to maintain clear, transparent communication with creditors, investors, and employees, while continuing to demonstrate progress in monetizing core assets and reducing the debt burden.
The group’s leadership also faces the challenge of aligning international asset sales with regulatory and cross-border considerations. The Deutsche KNM GmbH sale involves a major European asset, and cross-border transactions require careful coordination among multiple stakeholders, including potential regulatory approvals, tax considerations, and integration planning with NGK Insulators Ltd. The potential sale of FBM Hudson Italiana SpA likewise involves navigating European markets and stakeholder interests. The successful execution of these assets’ divestitures could provide KNM with much-needed liquidity to fund ongoing restructuring while signaling to creditors a credible path toward strengthening the balance sheet.
In summary, KNM’s asset disposal strategy, coupled with the RO framework and ongoing creditor negotiations, constitutes a comprehensive effort to stabilize the company and reposition it for future profitability. The interplay of these elements—asset monetization, legal protections, and creditor engagement—will be decisive in determining the timing, scale, and success of the company’s turnaround. The market will remain vigilant for concrete milestones, including progress in asset sales, RO approvals, and evidence of improved cash flow generation as KNM moves forward.
Creditor Dynamics, Governance, and the Path Forward
The interplay between KNM’s creditor base and its restructuring actions remains a critical determinant of the group’s ability to navigate PN17 constraints and return to profitability. Creditor cooperation, including the willingness of lenders like MBSB Bank Bhd to adapt terms and support protective measures such as the restraining order, can accelerate the restructuring process by reducing the likelihood of aggressive enforcement actions that could derail strategic initiatives. A constructive creditor environment aligns incentives around asset monetization and debt reduction, enabling KNM to pursue a disciplined, phased approach to restructuring rather than reactive, piecemeal actions driven by isolated creditor pressure.
The restraining order, in particular, is a strategic tool designed to preserve the integrity of KNM’s restructuring framework. By creating a defined period during which the group can implement its turnaround plan with a degree of legal shelter, the RO can mitigate the risk of creditor actions interfering with critical operational changes, such as asset sales, workforce adjustments, and supplier negotiations. The success of the RO will depend on KNM’s adherence to a credible and credible timeline, the transparency of governance, and the ability to demonstrate tangible progress toward debt reduction and revenue stabilization.
From a governance perspective, KNM’s leadership team must maintain a steady cadence of communications with its creditors to sustain trust and reduce uncertainties. This includes providing timely updates on asset sale negotiations, RO progress, and milestones in the restructuring plan. It also involves presenting detailed, credible financial projections that reflect updated cash flow expectations, debt service capacities, and liquidity scenarios under various contingencies. Transparent governance and measurable progress can bolster creditor confidence, potentially leading to more favorable refinancing terms or more flexible debt maturities that support a sustainable recovery path.
The group’s multiyear turnaround plan is expected to balance asset rationalization with ongoing operational optimization. The sale of Deutsche KNM GmbH to NGK Insulators Ltd, if concluded, would deliver a significant cash infusion that improves liquidity and strengthens the capital base. This, in turn, could enable KNM to pursue additional value-creating initiatives, including potential strategic partnerships, joint ventures, or further asset disposals that align with the company’s core competencies and earnings potential. The company’s strategic focus on core assets, particularly those connected to Borsig GmbH’s earnings power, is central to its long-term profitability prospects.
The broader market and industry context for KNM includes ongoing challenges in the oil and gas services sector, where KNM’s business footprint is significant. The group’s PN17 status underscores the fragility often faced by mid-sized engineering and service groups operating in a capital-intensive, cyclic industry. The decision to pursue strategic asset sales, coupled with legal protections and creditor engagement, reflects a prudent approach to preserving value in the face of a challenging market environment. Investors will be keen to assess how KNM’s measures translate into actual cash generation, debt reduction, and a return to sustainable profitability across its major markets and segments.
In the near term, the path forward involves tightening execution discipline and maintaining clear governance standards. The management team must deliver regular, transparent updates about the RO status, asset sale progress, and milestones in the restructuring program. This includes communicating any changes in expectations, potential risks, and the steps being taken to mitigate these risks. By aligning communications with a disciplined execution plan, KNM can foster a more predictable environment for creditors, investors, and employees, enhancing the prospect of a successful turnaround and a more stable financial future for the group.
Market Reactions, Performance, and Strategic Outlook
The market valuation of KNM has reflected the uncertainties of its restructuring journey. With a share price that has remained at a record low of 3.5 sen and a market capitalization around RM114.61 million, KNM has faced persistent selling pressure, particularly as the stock came under scrutiny for PN17-related challenges and debt concerns. Over the past year, the KNM counter has fallen more than 53%, signaling a broad reassessment by investors of the group’s ability to reverse its fortunes in the near term. Such a decline underscores the importance of timely and credible restructuring actions, including the RO, asset disposals, and debt reductions, to restore investor confidence and attract new capital or strategic partners.
Analysts and market observers will be watching for several key indicators that could influence KNM’s stock trajectory and overall recovery prospects. First, the successful execution of the €270 million Deutsche KNM GmbH sale to NGK Insulators Ltd would provide a major liquidity boost that could reduce liquidity pressure and improve debt service metrics. Second, progress on disposing FBM Hudson Italiana SpA—after a third attempt—would reinforce the narrative that KNM is serious about shedding non-core assets and refocusing on core earnings drivers. Third, the status and outcome of the RO will be crucial in determining the tempo and reliability of KNM’s restructuring plan, as a granted RO creates a stable window for implementation, while any delays could heighten uncertainty and volatility.
For creditors, the ongoing dialogue with KNM and the potential for long-term recoveries are important considerations. If KNM can demonstrate consistent progress toward debt reduction, improved cash flows, and credible monetization of assets, creditors may be inclined to adjust terms, provide additional financing, or participate in refinancing opportunities under more favorable conditions. Conversely, if progress stalls or asset sales encounter regulatory or market obstacles, creditors may push for more aggressive actions that could impact KNM’s operations and long-term viability. The balance between ensuring operational continuity and achieving a sustainable capital structure will be essential for all stakeholders as KNM advances its restructuring program.
From a strategic standpoint, KNM’s trajectory hinges on the successful combination of asset monetization, creditor cooperation, and operational optimization. The €270 million Deutsche KNM GmbH deal has the potential to reshape the group’s earnings profile by enabling the company to focus on its strongest assets while reducing exposure to underperforming units. The sale of FBM Hudson Italiana SpA, if completed, would further align the group’s asset base with its core competencies and strategic objectives. Such outcomes could contribute to improved financial metrics, enhanced liquidity, and a more favorable outlook for KNM’s turnaround story.
Stakeholders, including employees and suppliers, will be watching how the restructuring unfolds. The RO provides a period of stability that can facilitate workforce and supplier negotiations, retaining business continuity while the group implements changes. Ensuring fair treatment of suppliers and maintaining continuity of critical supply chains will be essential to preserving KNM’s operational capabilities during the restructuring. The continued dialog with creditors and the transparent communication of milestones will be important factors in sustaining business confidence and enabling KNM to navigate through the complexities of PN17 remediation.
Overall, KNM’s current phase reflects a cautious yet proactive approach to turnaround. The withdrawal of MBSB’s originating summons against Perwira Awan Sdn Bhd, in the context of discussions surrounding the RO and broader asset monetization, signals a potential shift toward a more collaborative creditor environment. If successive asset disposals proceed as planned, and if the RO remains in place while the group completes its restructuring milestones, KNM could move toward a more stable financial position and an eventual return to profitability. The road ahead will require disciplined execution, ongoing stakeholder engagement, and a steady flow of credible information to sustain confidence in the group’s long-term viability.
Conclusion
KNM Group Bhd has navigated a complex set of developments as it pursues a comprehensive restructuring strategy within the PN17 framework. The withdrawal of MBSB Bank Bhd’s originating summons against Perwira Awan Sdn Bhd, following negotiations and accompanied by MBSB’s expressed support for KNM’s restraining order, marks a significant step in stabilizing the group’s legal and financial environment. This move aligns with KNM’s broader aims to secure creditor collaboration, protect its restructuring timeline, and execute asset monetization that could strengthen liquidity and reduce leverage. The group’s ongoing plans to sell Deutsche KNM GmbH to NGK Insulators Ltd for €270 million and to pursue buyers for FBM Hudson Italiana SpA illustrate a deliberate effort to streamline its asset portfolio and focus on core earnings drivers, particularly Borsig GmbH, the principal contributor within the German unit.
KNM’s stock performance and market valuation remain a barometer of investor confidence and the perceived likelihood of a successful turnaround. The record-low share price and declining market capitalization reflect ongoing risk and uncertainty, underscoring the importance of transparent governance, credible milestones, and timely asset disposals. The group’s leadership continues to stress the need for creditor trust and collaboration to achieve a balanced resolution that benefits all stakeholders, including employees, suppliers, and shareholders. If KNM can deliver on RO approvals, asset sales, and debt reductions within a disciplined timeline, the company could chart a more favorable trajectory toward profitability and renewed growth. The path remains challenging and contingent on execution, market conditions, and the continued willingness of creditors to engage in constructive negotiations that support a sustainable, long-term recovery for KNM and its broader ecosystem.