DISTRESSED Libra Group has entered a letter of intent (LOI) with SMTM Investment, a potential white knight, for a S$6 million investment, the Catalist-listed firm disclosed in a Tuesday night bourse filing.

The S$6 million injection would be used to restructure Libra and its wholly-owned unit Kin Xin Engineering. It would comprise a S$3 million tranche to subscribe for new ordinary shares in the capital of Libra and a S$3 million working capital loan.

Under the equity tranche, S$1 million would be used to fund the scheme of arrangement for Libra and its creditors, and S$1.3 million for that of Kin Xin; S$700,000 would be retained as working capital for the restructured entity.

Under the loan, S$1.3 million would be extended as rescue financing to Kin Xin, and the remainder, as a working capital loan to Libra and/or Kin Xin.

SMTM is "an unrelated third party" of Libra and does not hold any of its shares, Libra said. The parties intend to finalise definitive agreements by Jan 15.