Tuesday, September 11, 2012

Muhibbah ... Sep12



The High Court dismissed with costs an application by CIMB and PWC to set aside a wining up petition brought by ZAQ Construction against APH. The court announced that it would hear ZAQ’s suit to wind up APH and appoint a liquidator, a move that will further complicate matters in the bank’s bid to savage the project.

If ZAQ is successful in its petition, it will add to the already complicated ownership issues related to APH, which has the mandate to build and operate a petroleum hub and bunkering facility on an island off Johor.

ZAQ obtained judgement against APH for rm419.7 million in 2011 and on Dec 23 2011 sent notice to wind up the company after it had defaulted on payment.

CIMB, a secured creditor of APH that is owed rm1.01 billion, together with the appointed receiver of the project, PWC is opposed to the petition brought by ZAQ. CIMB had appointed PWC as receiver on Dec 30, 2011.

CIMB’s plan for PWC to sell the conditional rights came about after CIMB withdrew its backing for an earlier restructuring plan by PWC which entailed a debt to equity swap. The plan was to transfer the conditional rights to develop and operate the petroleum storage, blending and distribution terminal to a SPV and later draw investors into the SPV and complete the project, which would give the project some value and enable all creditors to recover at least a portion of their money. Swiss group Mercuria Energy Group Ltd and Petrolax Ltd were said to be among the groups interested in APH.

However CIMB and PWC need to obtain the consent of the EPU to facilitate a change in the shareholding of APH.

Meanwhile Tan Sri Syed Mokhtar is also blocking a plan by CIMB to sell the financially troubled APH in Johor. PTP which is 70% owned by Syed Mokhtar’s MMC Corp is opposed to CIMB’s proposal to sell APH, and has made its objections known to the bank appointed receivers for the failed petroleum venture. CIMB advertised on July 4, 2012 that it was looking to sell the conditional rights to develop the petroleum storage, blending and distribution terminal located in Tanjung Bin, Johor and had given PWC the mandate to seek proposals for APH. It is now still uncertain if PWC is deterred by PTP’s objection.
Now (Sept 2012), APH requires an additional rm2.6 billion to refinance CIMB’s bridging loan and to restart the unsuccessful project. Other than CIMB, Muhibbah is owed rm400 million and other creditors about rm100 million.

In another development, Muhibbah is being sued by ZAQ. ZAQ Construction Sdn Bhd, the managing contractor in the Asia Petroleum Hub (APH) project in Johor, has filed a suit against several parties including CIMB and Muhibbah Engineering (M) Bhd over a restructuring scheme.

ZAQ had filed the suit against CIMB, APH, Lim San Peen (the receiver & manager appointed by CIMB over APH) and Muhibbah.

ZAQ is alleging Muhibbah's involvement in the restructuring scheme proposed by the receiver & manager in January 2012 vis-vis the APH project, and thereby indicating its support for such proposed scheme.

APH managing contractor ZAQ Construction Sdn Bhd is suing CIMB and Muhibbah Engineering for potential damages. That Muhibbah is dragged into the picture, despite being part of those claiming against APH, is negative and reaffirms our expectation that the APH saga will be long drawn-out.

There seems to be no solution in sight for APH. This new legal action is likely to prolong the saga.

Muhibbah announced that ZAQ has filed a suit against CIMB, Lim San Pen, the receiver manager appointed by CIMB, and Muhibbah. ZAQ alleged Muhibbah's involvement in the APH restructuring scheme. To recap on the latest development on the APH saga on June 12 2012 the restructuring scheme was called off, as per Muhibbah's announcement that CIMB, the sole lender for the project, was withdrawing its support for the scheme. Management is of the view that the claim brought by ZAQ is frivolous” and it will defend the case.

The amount claimed against each of the defendants is unknown at this juncture.

Following CIMB's withdrawal of its support for the APH restructuring, the receivers have put into tender the development rights to APH. Though details of the bidders are unknown, valuations for APH are likely to be at a discount. This will further reduce the chances of all contractors recovering the amount owed to them from APH for work done.

Progress on APH appears to be even more protracted.

A bumper provision for Muhibbah in the current financial year is still likely. If the legal action favours ZAQ, there could be further downside to RNAV

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