Lion Corp/Megasteel ... Aug 09

Megasteel Sdn Bhd, a subsidiary of Lion Corp Bhd, is in default of a credit facility granted by Bank Pembangunan Malaysia Bhd and a syndicated term-loan facility granted by syndicated term-loan lenders.

However, Megasteel remains “solvent as it will be able to pay all debts as and when they fall due within a period of 12 months from the date of this announcement.

The downturn in the global financial and commodities market since the fourth quarter of 2008 had caused a “drastic weakening” of the domestic and global steel markets, adversely affecting Megasteel’s financial performance. As a result, Megasteel was not able to meet the principal payment due in respect of the credit facilities.

As at July 2009, Megasteel’s total outstanding principal amount stood at RM47.6mil for the Bank Pembangunan credit facility and RM1bil for the syndicated term-loan.

Megasteel was in the final stages of negotiations to schedule the repayment of the credit facilities.

Meanwhile, Lion Group, which owns steel, property and retailing businesses Megasteel Sdn Bhd plans to sell assets to pay debt and is getting support from lenders to reschedule RM1.05 billion of loans.

Megasteel, a steel mill owned by Lion Corp, part of the Lion Group, failed to meet payment on the loans as the weaker global economy hurt the company’s financial performance.

Megasteel is in the “final stage” of negotiating with Bank Pembangunan Malaysia Bhd and the syndicated term-loan lenders in order to meet its financial obligations.

The lenders haven’t declared that an event of default has occurred.