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LCL boss: I sold 28m shares to help firm repay bank loan

Business Times, Saturday, December 19, 2009, 07.08 PM

LCL Corp Bhd's (7177) chairman Datuk Low Chin Meng progressively sold some 28 milion shares a month before major subsidiary, LCL Furniture Sdn Bhd, defaulted in its payment of credit facilities.

"I had instructed for the shares to be sold to help the company pay its loan facilities," Low told Business Times when contacted yesterday.

The move however, did not help steer the group away from defaulting on its loans. The group is now in PN17 status.

LCL Furniture is currently under receivership.

Low raised some RM16 million in the open market through the disposals.
While he has no plans of leaving the group, he would be compelled to adhere to the wishes of shareholders and board members, if they want him to leave. There have been no calls for him to do so yet.

With his own disposals and CIMB Islamic Bank Bhd force-selling 16 million shares belonging to him last Monday, Low no longer owns shares in the interior fit-out company he co-founded 24 years ago.

"Our company still has cash flow, its a little stream that helps us to go about with our job, it's not a cascading waterfall, which is what the banks want," LCL Corp chief executive officer Paul Lim Pang Kiam said after the group's extraordinary general meeting (EGM) in Selangor yesterday.

The EGM was convened to approve a change in auditors for the group to Messrs UHY Diong, with the resignation of Messrs Ernst & Young. The resolution was approved in the meeting, which lasted about 20 minutes.

The company is currently engaging all its lenders and creditors proactively to seek an amicable solution and a way out to resolve the critical issues, which includes a global debt- restructuring scheme.

Lim said despite the board's best efforts of proactively coming up with a debt-restructuring scheme and explaining the situation to their creditors, they could not stop LCL Furniture from going under receivership.

"By pulling the plug, first and foremost, our reputation has been affected. This has set us back and we may have to start from (ground) zero," he said.

The board of directors of LCL group is currently working with the receivers and managers to resuscitate the company.

"We are currently also actively engaging our Dubai clients (on getting payments back on track)," Lim said.

Jobs in Dubai make up about 80 to 90 per cent of LCL Corp's revenue.

LCL founder in a quandary after losing grip on company

The Star, Wednesday December 16, 2009

PETALING JAYA: Founder and chairman of LCL Corp Bhd Datuk Low Chin Meng says he is unsure about his next move now that he has lost his grip on the company he founded more than 20 years ago.

“I am disappointed and sad,” a despondent Low told StarBiz yesterday when asked to comment on CIMB Islamic Bank Bhd’s move to sell Low’s remaining stake of 16 million shares, or 11.2%, in the interior fit-out firm in the open market.

“As of today (Tuesday), I am still the chairman but it’s the board’s decision whether they still need me after this,” Low said.

“If you were in my position, what would you do?”

Low’s comments come after it was revealed on Dec 10 that LCL was reeling from debts caused by the financial problems in Dubai, its main revenue generator.

Investors wasted no time in selling down the shares, sending its price to a record low of 21 sen the following day.

Adding to its woes, the company was publicly reprimanded for delays in submitting its financial statements and declared a PN17 status company yesterday.

In a statement to Bursa Malaysia, LCL said that arising from the financial developments in Dubai, there was “heightened uncertainty” to the extent of recoverability of LCL’s debts from the Dubai segment.

“LCL is unable to provide a solvency declaration,” it said.

Due to the tight overall working capital position, the company would also consolidate its financial position and adopt a conservative approach to maximise its “currently limited” resources, it told the stock exchange yesterday.

LCL also warned that the company could face financing and legal challenges in the near term including legal proceedings initiated by lenders and trade creditors.

Despite this, analysts feel the company can still be salvaged.

And the best person for the job is none other than Low, they say.

“If you talk about execution and ability, Low’s the guy. Besides, Dubai is not the end of everything, ” said Yeonzon Yeow, head of research at Kenanga.

“He can pick himself up if someone (banks) gives him a chance.”

Nigel Foo, a CIMB Investment analyst who also tracks the stock concurred, saying: “Nobody knows the business better than Low, no one has the expertise and commitment. I believe he is not going to just walk away.”

On Monday, CIMB Islamic Bank sold the 16 million shares, causing Low to lose control of LCL.

The shares were pledged to CIMB Islamic as security against financing. According to Bursa Malaysia filings, CIMB had invoked its rights under the memorandum of deposit to dispose of the shares in the loss-making firm.

The net proceeds from the disposal of shares was utilised to partially settle the outstanding overdue amount of the facility granted to LCL.

LCL has defaulted on some RM72mil in loans to Affin Bank Bhd and Bank Islam Malaysia Bhd and risks further defaults as the declining property sector in Dubai caused delays and, in some cases, non-payment of its receivables.

The company also borrowed from AMMB Holdings Bhd, Alliance Bank Malaysia Bhd, Bank Muamalat Malaysia Bhd, EON Capital Bhd, Public Bank Bhd, Standard Chartered Plc, Kuwait Finance House and Royal Bank of Scotland plc.

As at Sept 30, LCL’s net debt stood at RM376mil and its net gearing was 4.7 times.

“It’s really not his (Low’s) fault, people didn’t pay him back for the jobs he had completed, so he can’t pay the banks back. What he needs now is for the banks to give him a chance, throw him a lifeline so that he can have fresh working capital to accept new contracts and move on,” Kenanga’s Yeow said.

CIMB’s Foo believes that “if Dubai turns around, LCL can turn around”.

“If it bounces back by next year and collections can be made, it is possible for the firm to turn around. The company also has to work out a restructuring agreement with the banks. If everybody backs out, everybody loses,” he said.

Earlier this month, state investment arm Dubai World jolted markets around the world when it said it was in talks with creditors to restructure US$26bil of debt built up during the emirate’s real estate boom which started in 2003.

LCL was one of the local firms which leveraged on the boom, securing major projects in the multi-million dollar Palm Jumeirah development, the Dubai Metro urban transport system and the Dubai Marina Hotel.

In 2008, LCL derived more than 80% of its sales from Dubai compared with 46% a year earlier. At the close yesterday, shares in the company finished 2 sen higher to 25 sen.