LCL Corp Bhd May Fall On Withdrawal Of Bank Facilities

LCL Corp Bhd, a Malaysian interior design company, may fall to psychological 20 sen vs yesterday’s close at 23 sen (+53.3%), in knee-jerk reaction to statement to Bursa from troubled interior fit-out firm that lender Royal Bank of Scotland issued notice withdrawing facilities totalling MYR40.2 million to unit LCL Furniture.

LCL Corp Bhd was severely affected by the financial turmoil in Dubai and plunging property prices had resulted in delay and non-payment of its receivables.


Due to high exposure to Dubai property market,  LCL Corp Bhd’s stock price had fallen more than 55% since early November; in December, company says "severely" affected by Dubai turmoil, defaulted on MYR72 million of loans from Affin Bank and Bank Islam. Net debt as at Sept 30 stood at RM376 million with net gearing at 4.7 times.

Read more on Dubai debt crisis at Dubai World Crisis Brings Down the World

LCL Corp Bhd

LCL Furniture has been in the spotlight after it received a public reprimand from Bursa Malaysia for delaying its submission of financial statements. It had breached listing requirements for failing to submit the company’s annual audited accounts for the financial year ended December 31, 2008 on or before April 30, 2009.

LCL Furniture also has  offered so much potential two to three years back but its operations and balance sheet were hit hard after working conditions in Dubai deteriorated rapidly in the aftermath of the 4Q08 property crash.

Beside LCL Furniture, other main contractors in Dubai, including the Korean and Japanese contractors also become a Victim and hit by the Dubai debt crisis.

Given the financial developments in Dubai, analysts don’t think it will be able to recover its debt payments anytime soon.

Dubai on Monday officially inaugurated the centerpiece of its decade-long construction boom, with the surprise revelation that the world-beating 168-story skyscraper in a glitzy ceremony

The tallest building in the world Burj Dubai 2010, celebration opening ceremony biggest



LCL Corp notified over plans to cancel loan to unit


Debt-ridden LCL Corp Bhd (7177), whose share price shot up by 53 per cent yesterday, said it received notice from The Royal Bank of Scotland Bhd (RBS) over plans to withdraw and cancel loan facilities that were granted to its unit.
LCL told the stock exchange after the market closed yesterday that its unit LCL Furniture Sdn Bhd, which is under receivership, had received the notice last Thursday as it was in arrears of RM40.2 million.

The notice came from Messrs Skrine & Co on behalf of RBS. About RM19.5 million of the arrears were guarantee/bond facilities, while the rest was an overdraft facility.

Besides RBS, LCL Furniture also owes Affin Bank Bhd and Bank Islam Malaysia Bhd, bringing its total arrears as at the end of last year to RM112.2 million.

LCL, which last month slipped into Practice Note 17 (PN17) status, denoting its financially troubled position, also announced late yesterday that its board of directors was considering and formulating a plan to regularise its financial condition.

It said it has another 11 months to submit such a plan to the authorities for approval.

Prior to the two announcements, the stock soared by 8 sen to 23 sen on speculation that it might have made headway in its regularisation plan. It was the fifth most actively traded counter.

Dealers said the interest in LCL also came about after a run-up in another PN17 firm, Ho Hup Construction Co Bhd.

Ho Hup jumped 58 per cent to RM1.40 after its shareholders approved two land sales and on talk that it would start a big property project.

Other PN17 firm, such as Talam Corp Bhd (up 10 per cent) and Oilcorp Bhd, (up 26 per cent) were also among the top 20 most actively traded stocks yesterday.

Analysts believe it will take time for LCL to make progress with its debt restructuring or to find a white knight to come in.

Managing director and founder Datuk Low Chin Meng, when contacted, said he did not know the reason for the spike in share price.

He also denied market talk that he might have bought back shares in the company yesterday. "No such thing," he told Business Times.

Low had last year sold off all his shareholdings to help pay off the company’s debts. CIMB Islamic Bank Bhd also force-sold 16 million of his shares that had been pledged as security against financing.

LCL Furniture, a victim of the Dubai debt crisis, had defaulted on payments on its credit facilities after a plunge in property prices there resulted in non-payment by clients.


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


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 listed as PN17-status firm


LCL Corp Bhd (7177), the interior fit-out specialist that defaulted on loans as a result of the Dubai debt crisis, has sunk into Practice Note 17 (PN17) status.

"LCL is considered a PN17 company… as the company is unable to provide a solvency declaration to Bursa Securities," it said in a filing with the stock exchange yesterday.

The company said its board of directors would come up with a plan to improve its financial condition. The debt-ridden company has a year from now to submit the plan to regulators.

LCL has so far defaulted on RM69.4 million worth of loans due to Affin Bank Bhd and RM2.6 million to Bank Islam Malaysia Bhd, as it faces difficulty collecting payments for big jobs it had done in Dubai.

Given the financial developments in Dubai, there is "heightened uncertainty" as to the extent of the debts it can recover from the Dubai segment, it said. Analysts don’t think it will be able to recover its payments anytime soon.

"The company may face financing and legal challenges in the near term, including but not limited to, legal proceedings initiated by lenders and trade creditors," LCL said.

The stock was at its most active ever yesterday after CIMB Islamic Bank Bhd force sold 16 million shares belonging to LCL’s managing director, Datuk Low Chin Meng.

The shares, which represented his remaining 11.2 per cent stake in the company, had been pledged by Low as security against financing.

LCL’s shares rose 8.7 percent to 25 sen on some 41.8 million shares. Two market days earlier, they fallen to a record low of 22 sen.

There was more bad news for LCL yesterday as Bursa Securities publicly reprimanded it for not submitting last year’s annual audited accounts on time.

An analyst from a local brokerge said LCL’s way out of this financial mess is to get the commitment of banks to lend it more money so that it can undertake new projects that will enable it to pay off debts.

LCL plans to continue operating in Dubai, focusing mainly on debt collection.

10 Responses to “LCL Corp Bhd May Fall On Withdrawal Of Bank Facilities”

  1. Banks may face loss in recouping money from LCL

    Banks which had made loans to LCL Corp Bhd may have to face a “haircut” when they try to recoup their money.

    LCL Corp’s default in loan repayments to at least three banks could affect the financial institutions negatively, according to a local analyst.

    “How adversely these banks are affected will depend on the amount borrowed and LCL Corp’s repayment scheme over time,” he told StarBiz.

    LCL Corp, which last month slipped into the financially troubled Practice Note 17 (PN17) status, currently owes a total of RM112.26mil to the three banks.

    The banks involved are Affin Bank Bhd (RM69.42mil), Bank Islam Malaysia Bhd (RM2.63mil) and The Royal Bank of Scotland Bhd (RM40.21mil).

    “LCL Corp has 11 months to resolve its outstanding loans to these banks,” the analyst said, noting that the company had issued a statement to Bursa Malaysia on Jan 4 that it was presently considering and formulating a regularisation plan to resolve its financial obligations to the banks.

    He added that the banks might well have to settle for less than what was owed.

    “Ideally they would like to receive full payment but chances are slim and winding up the company’s operations is an unfavourable option,” he said.

    The analyst said LCL Corp’s debt servicing capability going forward would depend on how Dubai recovered from its credit crunch, as well as collections from LCL Corp’s debtors and the sale of the company’s non-core assets.

    A financial analyst from Singapore told StarBiz that LCL Corp’s debt position could signal “more companies following the course of LCL Corp in the later part of the year, especially if the credit crunch in Dubai remains unresolved.”

    He noted that some banks had tightened their credit facilities to companies with exposure to Dubai in view of the higher risk of doing business there, adding that there was a lesson to be learned from the LCL Corp episode.

    “They (banks) should review their lending practice to ensure that companies they back with sizable loans should not invest, do business or rely purely on one market for their growth and expansion,” the analyst said, noting that LCL Corp had relied too heavily on Dubai, with over 70% of its business, revenue and growth derived from there.

    “There was a clear signal of over exposure to one region, and too much focus on the construction industry,” he noted. LCL Corp’s core business is in providing interior fit-out services.

  2. UAE will ride out the downturn soon, firms told

    Malaysian companies need not worry about the economic situation in the United Arab Emirates as it will ride out the downturn soon, Datuk Seri Najib Tun Razak said.

    The prime minister said most projects with Malaysian involvement were still proceeding without any problems.

    “I am sure Dubai will be able to ride out the current downturn quickly, especially because of its relationship with Abu Dhabi,” he told the Malaysian media at the conclusion of his visit here yesterday.

    He said Abu Dhabi, which together with Dubai and five other emirates form the UAE, was resource-rich and largely unaffected by any downturn.

    Late last year, Abu Dhabi made available US$10bil (RM33bil) in funds to help Dubai repay some of the money borrowed for its breakneck-speed development.

    Najib said Malaysian companies had been given a lot of business opportunities in the UAE, as they had a good reputation for their good quality work and ability to deliver on time.

    For example, Najib said, a Malaysian company was currently bidding for the maintenance contract for the Burj Khalifah, the world’s tallest building.

    “If the company is successful, it is going to be a very significant achievement for Malaysia,” he said, adding that the company had the experience in maintaining tall buildings from their job with the Petronas Twin Towers.

    He was given a tour of the 828m-high building with more than 160 floors on Monday evening during a day visit to Dubai.

    Najib said new opportunities were also opening up with the move to develop Abu Dhabi’s Western Region.

    He also paid a visit to the Abu Dhabi Ruler’s Representative of the Region, Sheikh Hamdan Zayed Al Nahyan yesterday.

  3. LCL names potential US investor

    PETALING JAYA: Troubled firm LCL Corp Bhd has named US’ second-largest interior and exterior contractor KHS&S as a potential investor to help revive the company.

    “The company has identified a potential investor, KHS&S as part of the plan to regularise its financial condition,’’ LCL told Bursa Malaysia yesterday, adding that it would “discuss, deliberate and outline” the regularisation plan with KHS&S representatives.

    The compay said KHS&S was involved in the construction of major theme parks in the United States including Disneyland, Universal Studios and Las Vegas MGM Studio on top of over 3,000 projects completed worldwide.

    KHS&S also has regional offices in Macau, Kuala Lumpur, Bangkok and Singapore.

    “LCL will make the necessary announcements to the exchange accordingly,” the statement said.

    LCL got into financial difficulties after its clients in Dubai failed to make payments for work done. This in turn had affected the group’s cashflow and hindered its ability to service loans taken from financial institutions to finance the projects.

    In a separate statement, the company said it had yesterday received a letter of demand from Public Bank Bhd to settle an outstanding debt of RM1mil.

    Since early December, LCL had received letters of demand from banks for loans amounting to RM116mil.

    LCL had bet heavily in Dubai, with an estimated 70% of its orderbook made up of projects in the emirate. The debt-fuelled expansion was LCL’s Achilles’ heel and this was exposed after the Dubai property market collapsed.

    Shares in LCL jumped 6 sen, or 30%, to 26 sen on total volume of 56.5 million. It was the most active stock traded on Bursa Malaysia yesterday.

    The announcements by LCL yesterday were released after trading hours.

  4. LCL posts higher loss on lower progress billings

    PETALING JAYA: LCL Corp Bhd incurred a sharply higher net loss of RM334.72mil for its fourth quarter ended Dec 31 from a net loss of RM17.39mil in the previous corresponding period.

    Revenue for the quarter fell to RM66.11mil from RM115.89mil previously while basic loss per share was 233.85 sen against a loss of 12.15 sen before.

    For its financial year ended Dec 31, the company had a net loss of RM393.35mil compared with a net profit of RM9.35mil previously while revenue for the period fell to RM309.83mil versus RM464.98mil.

    In a filing with Bursa Malaysia yesterday, the company said the results were mainly due to lower progress billings for most of its ongoing Dubai projects.

    “The losses were mainly attributed to the delay in the projects resulting in cost overrun arising from the prolongation of projects and additional costs incurred in downsizing our operations in Dubai,” it said.

    LCL Corp said its classification as a PN17-status company, and the appointment of a receiver and manager to LCL Furniture Sdn Bhd, a major contributor to its operations, “had severely hampered the operations of the group on an ongoing concern basis.”

    “The board of directors is of the view that without the meaningful recovery of our debt from our customers and the success of the debt-restructuring scheme with all our lenders and creditors, the prospects of the group remain uncertain,” it said.

    Due to the fallout from the Dubai financial crisis, LCL Corp, which has several projects there, has been struggling to recoup its outstanding bills from its Middle East customers.

    As at Dec 31, it said the group had credit facilities from financial institutions totalling RM455.27mil which are guaranteed by LCL Corp.

    Accordingly, LCL Corp was contingently liable to the extent of credit facilities utilised by the subsidiary companies amounting to about RM269.67mil, the company said.

  5. CDRC gives LCL 6 months to complete debt revamp

    PETALING JAYA: LCL Corp Bhd, a PN17-status company, has submitted an application to Corporate Debt Restructuring Committee (CDRC) for assistance to mediate between LCL and its financial creditors.

    In a note to Bursa Malaysia yesterday, it said in the application on Feb 10, the company proposed to restructure its total debt to financial creditors amounting to about RM400mil.

    Refering to its announcement on March 1, LCL had said there was no major development on the status of default, except for the announcements made to date.

    Yesterday, it said CDRC had via its letter dated March 3 accepted LCL’s application and had allowed LCL a period of six months from March 3 to complete the proposed debt restructuring scheme.

    It was reported that for its financial year ended Dec 31, LCL had a net loss of RM393.35mil compared with a net profit of RM9.35mil previously while revenue for the period fell to RM309.83mil versus RM464.98mil.

    The company said the results were mainly due to lower progress billings for most of its ongoing Dubai projects.

    Due to the fallout from the Dubai financial crisis, LCL Corp, which has several projects there, has been struggling to recoup its outstanding bills from its Middle East customers.

    As at Dec 31, it said the group had credit facilities from financial institutions totalling RM455.27mil which were guaranteed by LCL Corp.

    Accordingly, LCL Corp was contingently liable to the extent of credit facilities utilised by the subsidiary companies amounting to about RM269.67mil, the company was reported to to have said.

  6. LCL Corp unit gets legal notice

    PETALING JAYA: LCL Corp Bhd said its subsidiary LC-Rex Steel Sdn Bhd has been served a legal notice from Public Bank Bhd’s laywers demanding outstanding payment.

    In a statement to Bursa Malaysia, it said the company was given 21 days from the date of receipt of the notice to settle the outstanding payment, which it did not disclose, failing which winding-up proceedings would be taken against the company.

    LCL said it would defend these proceedings and would contest any winding-up proceedings that may be initiated. It added that the company was seeking the necessary legal advice to resolve and/or defend against this matter.

  7. CDRC action adds to LCL’s setback

    PETALNG JAYA: LCL Corp Bhd suffered another setback after the Corporate Debt Restructruing Committee (CDRC) “terminated LCL Corp’s admission” for failing to submit a revised regularisation plan for its review.

    In February LCL had applied to CDRC for help to mediate negotiations between the company and its financial creditors on loans amounting RM400mil.

    LCL had defaulted on the loans because the interior fit-out firm was unable to collect payments for work done from clients in Dubai.

    On March 3, LCL said CDRC had agreed to assist the company, provided that it could come out with a regularisation plan within six months.

    “As the result of the withdrawal of Axis Global Capital Sdn Bhd as potential white knight for the proposed regularisation plan, CDRC has terminated LCL’s admission with effect from July 1 since LCL is unable to submit a revised plan for CDRC’s assessment,” LCL said yesterday.

  8. Faber wins job in Abu Dhabi

    PETALING JAYA: Faber Group Bhd subsidiary Faber LLC has been conditionally awarded a contract in Abu Dhabi worth RM20.38mil.

    In a filing with Bursa Malaysia, Faber Group said the contract from Abu Dhabi Health Services Co was related to the initial repair, maintenance and operation works for all mechanical systems and equipment, and various electrical installations and fittings at Sheikh Khalifa Medical City and affiliated buildings in Abu Dhabi Island.

    The project completion period is three years.

  9. LCL unit gets writ of summons

    PETALING JAYA: LCL Corp Bhd told Bursa Malaysia that on Monday, its unit LCL Trading Sdn Bhd (LCLT) was served a writ of summons dated Aug 2 and statement of claim dated July 19.

    This was in respect of outstanding amount due to Clasquin (M) Sdn Bhd totalling RM407,442.31 (as at April 28).

    “LCL Corp will not take any steps in respect of the writ of summons,” it said.

  10. LCL Corp faces delisting

    KUALA LUMPUR: PN17 company LCL Corp Bhd could be delisted by Dec 27 for failing to submit its regularisation plan to the Securities Commission or Bursa Malaysia.

    In a note to Bursa Malaysia yesterday, LCL said trading in its shares would be suspended with effect from Dec 23 and the securities de-listed on Dec 27 unless an appeal was submitted to Bursa on or before Dec 22.

    In the event LCL submits an appeal to Bursa within the appeal time frame, the removal of the securities of the company from the official list of Bursa on Dec 27 shall be deferred pending the decision on appeal.

    Upon the delisting of the company, LCL will continue to exist but as an unlisted entity.