Written by Joy Lee
Tuesday, 15 December 2009 11:16
KUALA LUMPUR: The debt blow-up in Dubai has claimed its first victim in Malaysia.
LCL Corp Bhd’s founder and chairman Datuk Low Chin Meng saw his shares being sold down completely yesterday after CIMB Group Nominees (Tempatan) Sdn Bhd disposed of shares pledged by him.
According to an announcement on Bursa Malaysia, a block of 16 million LCL shares which were owned by Low, representing an 11.2% stake in the company, was pledged to CIMB Islamic Bank Bhd as part of the security for a facility granted to LCL.
The announcement said CIMB had invoked its rights under the Memorandum of Deposit to dispose of the security of the loss-making interior fit-out (IFO) company on Dec 11. The net proceeds from the share sale went to partially settle the outstanding overdue amount of the facility granted to LCL.
That LCL is the first local casualty from the Dubai debt catastrophe does not come as a surprise. The company has defaulted on some RM72 million in loans to Affin Bank and Bank Islam Malaysia and may have further defaults ahead as the deteriorating property sector in Dubai caused delay and non-payment of its receivables. As at Sept 30, 2009, its net debt stood at RM376 million and its net gearing was 4.7 times.
LCL had said the defaulted bank borrowings with Affin Bank and Bank Islam would have a consequence on its other bank borrowings, which will also be declared in default under the cross-default clause. CIMB Research said more than 75%, or a total of RM293 million, of the group’s loans as at end-2008 mature in less than a year.
Low, 47, is the founder of LCL, which is probably the only IFO company listed on Bursa Malaysia. Its rise was phenomenal and in tandem with Dubai’s construction boom as it rushed into putting up fancy hotels and buildings. It had jobs with the multi-million Palm Jumeirah development, the Dubai Metro urban transport system and the Dubai Marina Hotel.
Prior to the selldown, Low was the single largest shareholder in LCL with a slightly more than 30% interest.
According to CIMB Research, LCL may find itself in a sticky situation for many months to come as the bulk of its RM180 million outstanding overseas contracts are from Dubai.
Prior to the fallout in Dubai, Low had been paring his stake in the company. According to filings with Bursa, last month alone, Low reduced his shareholding in LCL by about 28 million shares, or 20%, for some RM16 million.
The counter gained one sen to close at 23 sen yesterday after hitting an all-time low of 17 sen in intraday trading. Year to date, the stock has lost 48 sen or some 68%.
LCL posted a wider net loss of RM25.4 million for the third quarter ended Sept 30, 2009. Its nine-month net loss stood at RM58.6 million.
LCL’s recent tie-up with Sunway Holdings Bhd to undertake IFO jobs in Abu Dhabi is perhaps the only positive sign for the company’s business at the moment.
This article appeared in The Edge Financial Daily, December 15, 2009.
1 comments:
Don't pitty Low. He is very smart person. I see the listing of LCL was a scam. Lossers are bankers and other inexperience/bad luck investors. Today its share price up for second day. My advice, just sell them at any price now if have the shares. Consider it a learning in your investment life.