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Tuesday May 1, 2012
By FINTAN NG email@example.com
White knight option later
SHAH ALAM: Financially-troubled bread and confectionary maker Silver Bird Group Bhd will only consider talking on an official basis to parties interested in taking stakes in the company after the regularisation plan has been passed by shareholders and creditors.
The company's chairman Datuk Dr Gan Khuan Poh said in a briefing to the media following the AGM that the focus of the board of directors was to regularise the company before discussing the entrance of a white knight.
“Yes, there has been interest by others to come in, but we're not sure whether the interest is genuine,” he said.
The company entered into Practice Note 17 status on Feb 29 after defaulting on payments to creditors and, according to stock exchange rules, has a year to come up with a regularisation plan.
“We've some initial plans but they keep changing because we've been talking to various stakeholders. We hope to have a plan by mid-May, right now whatever we have is still preliminary,” Richard Azlan Abas, a director and chairman of the audit committee, said.
He said the future of the company as a going concern would depend on the stakeholders including the creditors and banks. “They've so far shown tremendous support,” Richard said.
He said an independent adviser for the regularisation plan involving a corporate and debt restructuring scheme has not been decided on yet.
The preliminary plans, as set out in an announcement to Bursa Malaysia last Friday include capital reduction, rights issue, debt settlement involving cash repayment and terming out of part of the liabilities, debt to equity conversion, waiver of debt and liquidation of subsidiaries.
“If most of the shareholders agree to the plan, then we'll proceed with it,” Gan said, adding that the directors wanted to ensure that the company was on a firmer footing before moving forward with other plans including discussions with a white knight.
He said the first option for any restructuring of the company would go to the shareholders before involving any white knight. “We've to convince the shareholders that there is value in the company while an independent study we commissioned shows the business is viable,” Gan pointed out.
According to Bloomberg data, Lembaga Tabung Haji holds a 22.19% stake, Berjaya Corp Bhd (20.53%), Koperasi Permodalan Felda (12.7%) and Sydney-based private equity firm CVC Ltd (9.07%).
Gan said the company was still viable and that there were plans to enter into the premium-bread business. “We want to enter into the premium-bread business where we believe we've a niche since bread consumption has risen, making margins better in this segment of the business,” he said.
Meanwhile, an analyst who used to cover the company said the business was salvageable. “In regards to the plant and machinery, it's not bad and relatively new, if ever Gardenia Bakeries (KL) Sdn Bhd or Massimo (under FFM Bhd) need extra capacity, they can tap into Silver Bird,” the analyst said.
The analyst said there were pockets in states like Perlis, Kelantan and Terengganu where Gardenia and Massimo do not have a presence.
“These are the areas that Silver Bird should go into,” the analyst said.
Besides the premium-bread plan, Gan said plans were being mulled on how best to monetise or create value from the intangible assets such as the distribution network. “We've as good a network as Gardenia and if we can ramp up sales, then this will be significant,” he said.
News of financial irregularities surfaced in late February after Silver Bird's independent auditors Crowe Horwath refused to provide a basis for an audit opinion to the financial report for the financial year ended Oct 31, 2011.
The auditors pointed out that poor keeping and the inability to verify sales transactions were among the main reasons why they refused to provide the opinion.
The company has since defaulted on loans to creditors and banks as well as had a distribution agreement for prepaid cards (one of the company's main sources of revenue) terminated by Maxis Bhd.
The board formed an inquiry committee and appointed PKF Advisory Sdn Bhd as the forensic accountants to conduct a forensic review into the affairs of the company. Both have to complete their investigations by end-May.
Group managing director Datuk Jackson Tan and group executive director Ching Siew Cheong, who were suspended on Feb 24, were removed from the board following the AGM.
The share price of Silver Bird has fallen nearly 61% to 16 sen year-to-date.
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