FOR a company that has been described as being on the brink of bankruptcy, it is mind-boggling that the stock price of Perak Corp Bhd (PCB) has almost tripled in the last week alone.
The excitement surrounding the company is simply that it has announced a plan to restructure its paralysing debts.
Perak’s former chief minister Datuk Seri Ahmad Faizal Azumu appears to be the person instrumental in bringing in the new management to turn around PCB in July as it was declared a Practice Note 17 (PN17) firm in February this year.
State agency Perbadanan Kemajuan Negeri Perak is PCB’s largest shareholder with a 52.9% stake.
On Thursday, PCB said it is restructuring its debts worth RM858.37mil as at end-June.
But is that plan too ambitious with a mounting debt of more than RM800mil?
Not so, according to PCB chief executive officer Zainal Iskandar Ismail, who was appointed to the position in July this year to fix the company’s woes.
“I am optimistic that the creditors will look at the restructuring positively. It is not an easy negotiation. But if they do not support us, the only option is to liquidate the company. Nobody wants that to happen including the creditors, ” he tells StarBizWeek.
The scheme of arrangements with its creditors includes a cash settlement of over RM220mil, the issuance of RM70mil new preference shares and a debt waiver of RM544.55mil, the majority of which, amounting to RM343.59mil, is being waived off by the group’s subsidiaries and associates.
Part of its cash settlement will come from the sale of four pieces of vacant commercial land and one piece of vacant residential land in Hulu Kinta, Perak. All of this is being sold to the Social Security Organisation (Socso).
A sum of RM70.81mil of the RM78.68mil proceeds from the sale will be used for the purpose, while the other RM7.87mil will go for working capital requirements, PCB says.
Apart from the cash settlements and the issuance of shares, Zainal hopes the remaining debt owed to creditors of more than RM200mil is waived off by the creditors.
“We are ready to take a full haircut of more than RM300mil. We need the lenders to compromise on their part as a huge amount of debt by our subsidiaries is being waived off, ” he points out.
The creditors involved in PCB’s debt settlement scheme include Affin Islamic Bank Bhd, CIMB Bank Bhd, Affin Hwang Investment Bank Bhd, Bank Pembangunan Malaysia Bhd and Malaysia Debt Ventures Bhd.
With the debt restructuring plan in hand, lenders of subsidiaries of a wholly-owned unit of PCB, PCB Development Sdn Bhd, would recover slightly more than 50% of the monies owed.
The recovery of monies would come in from redeemable cumulative preference shares B (RPS-B) and the disposal of Animation Theme Park Sdn Bhd’s (ATP) theme park asset.
PCB owns a 51% stake in ATP.
Under the restructuring plan, PCB has set out a six-month timeframe to offload ATP which it believes can fetch a price of around RM100mil.
Iskandar is optimistic that the group would be able to fetch that price as the 24-acre theme park’s land is valued at about RM100mil.
“This is the minimum we are expecting to get out of the theme park. We have to be optimistic, ” he notes.
However, fetching RM100mil may not be so easy, according to a debt restructuring specialist.
For one thing, buyers may press for a lower price, he says.
“In this market condition, you have been given six months to find a buyer. The buyer may press the price further down, perhaps even to as low as a 50% discount to RM50mil. And this also is assuming there is actually a keen buyer to be found within six months, ” the specialist points out.
The big day of PCB to get the approval from the banks over the restructuring plan is on Jan 8 next year.
The good odds are that the proposal of the debt restructuring plan is likely to be approved as the bulk of the debt waiver coming from its subsidiaries is “reasonable” for banks to consider, says the debt restructuring specialist, who is also a former investment banker.
“It is likely to be approved due to the partial recovery of the monies owed and the banks would likely approve the redeemable cumulative preference shares B (RPS-B) as well, ” he says.
The group will issue up to 50.24 million RPS-B at an issue price of RM1 each.
Besides that, in a filing with Bursa Malaysia, PCB has also proposed to issue 19.9 million RPS-A at an issue price of RM1 each to settle the outstanding amount of RM19.9mil owed to the development financial institutions.
“The issuance of RPS-A and RPS-B is akin to deferred cash payment to the Scheme Creditors, as redemption of the RPS-A and RPS-B is in three and five years respectively, ” it said.
Once the restructuring plan is approved, Zainal discloses that the group would focus on the expansion of its core businesses which are port and logistics, property development as well as hotel.
“For the property development sector, we have sizeable landbank that we can unlock the value.
“For the hotel businesses, we are cautiously looking at that option because of the Covid-19 pandemic that has led to a decline in tourism.
“And for our port and logistics business, we can potentially go into the downstream operation of the port sector. You have to wait for our regularisation plan, ” he notes.
PCB owns and operates Lumut port.
Given the challenging environment surrounding PCB, Zainal is hoping the worst will be over soon, saying that “I took the job with a calculated risk in mind and it is doable.”