Lion Corp said on Tuesday the guarantee was based on a mutual settlement between TNB and its 78.89% owned Megasteel on April 19 over a financial claim made by the power company.
"The proposed provision of corporate guarantee is part of the settlement agreement with TNB," it said.
Lion Corp said Megasteel was its core subsidiary that contributed more than 90% to the group's revenue while the group's financial position hinged on Megasteel. Hence, it was crucial for Lion Corp to undertake the proposed provision of corporate guarantee to ensure Megasteel continues its operation in an orderly manner.
To recap, in September 2002, Lion Corp issued a corporate guarantee of RM40mil to TNB. At that point, Lion Corp held 90% of Megasteel and the remaining 10% by Khazanah Nasional Bhd.
Megasteel's core activity is manufacturing hot rolled coils and cold rolled coils while its subsidiary produces and markets industrial gases.
Megasteel is the first steel mill in Malaysia to produce flat steel products in the form of HRC. Its audited net loss for FY ended June 30, 2013 was RM365.64mil whilst the group's net liabilities as at June 30, 2013 were RM431.73mil.
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