Wednesday June 27, 2012
Muhibbah now in deeper end
PETALING JAYA: Muhibbah Engineering Bhd’s financials would likely continue to suffer as CIMB Bank Bhd has pulled out from a debt restructuring for Asia Petroleum Hub Sdn Bhd (APH), delaying APH’s payment for construction works done by Muhibbah.
In a filing with Bursa Malaysia, Muhibbah announced: “Further to our previous announcements made in respect of the APH project, we wish to update that our legal advisers have been informed by CIMB Bank that the bank has withdrawn its support in respect of the proposed scheme to restructure APH, which was filed previously by the receiver and manager of PricewaterhouseCoopers appointed by the bank.”
It added that the company was currently evaluating various courses of action and solutions which investors would be updated about accordingly.
To recap, Muhibbah was among the leading contractors for the RM1.4bil bunkering island project undertaken by APH off Tanjong Bin in Johor.
The project has been plagued with cost overruns and delays which prompted its main financier, CIMB, to plug the line of credit.
The APH project was awarded to Muhibbah in 2006, and due to material cost escalation in 2008, the project cost rose from RM1.2bil to RM2bil while Muhibbah had completed about 40% of the physical works of the project. When reported about in February, the project was about 60% complete with another RM1bil needed to complete the job.
Then, it was understood that Muhibbah had completed RM630mil worth of works and had yet to receive payment for RM371mil, with its total contract value of Muhibbah’s scope of works amounting to RM830mil.
When CIMB came into the picture early February for the restructuring exercise, it was rumoured that Muhibbah and CIMB could end up as shareholders in APH through a debt-equity swap.
CIMB owned 75% of the unsecured and secured debt of APH each.
However, it was reported that not all the APH creditors agreed to convert their debt to equity, which may stall the restructuring of APH as the scheme would need 75% creditors’ support to be carried out.
At that point, Muhibbah had not provided for the amount due for the project, while all the other contractors involved had done so.
At the end of the same month, Muhibbah filed a suit against the promoter APH and the managing contractor, ZAQ Sdn Bhd, for overdue claims amounting to RM381mil.
The court proceedings, if successful, would improve Muhibbah’s financial standing.