PETALING JAYA: Tile manufacturer Seacera Group Bhd has warned that it is potentially headed towards a default on its payment obligations in the highly likely event that it will not be able to proceed with its settlement proposals in time.
In a filing with Bursa Malaysia, the company said if it is unable to complete the proposals in a timely manner, it will be headed towards default, and possibly cross default on all its outstanding banking facilities and corporate guarantees of the banking facilities, on the payment obligations amounting to up to RM81 million.
In addition, the company will not be able to declare that it is solvent as the board will not be able to form an opinion that the company will be able to pay all its debts as and when they fall due.
In the event of a default in payment and inability to provide the solvency declaration, the company will trigger Practice Note 17 criteria and will face possible suspension and de-listing as an affected listed issuer.
Earlier on Jan 16, the group announced the proposed settlement of RM31.31 million owed by Seacera and two of its subsidiaries namely Seacera Ceramics Sdn Bhd and Seacera Properties Sdn Bhd to certain creditors. The amount was to be settled via the issuance of 149.09 million new shares at 21 sen per share.
The group had also proposed a private placement of up to 126.34 million new shares representing 30% of the existing issued share capital, to be subscribed by potential investors. The proposed exercise was expected to raise gross proceeds of about RM24.64 million, of which RM20 million was to be used to repay bank borrowings.
The settlement agreements were subject to the approval of Seacera shareholders to be obtained on or before April 15 (cut-off date), which was subsequently extended by 20 days to May 6.
The company was to convene an EGM on April 16. However, its largest shareholder Datuk Tan Wei Lian initiated legal action to stop the company from proceeding with the proposed resolutions. A writ and an application for injunction was served on the company and the EGM was adjourned to a later date.
Tan, who holds a 16% stake, withdrew a notice to convene an EGM to remove two directors last week due to a “technical” issue. However, he is planning for an EGM again on May 15 to remove eight directors and appoint six new directors.
Following the injunction, the company will be blocked from proceeding with the proposals, which are imminent for it to immediately address its current cash flow position. Without the proposals, settlement creditors, financial institutions and other creditors may initiate legal proceedings which may include winding up petitions against the group to recover their ascertained/agreed debts.
The group will also be unable to finance its working capital requirements for its tiles plant operations and/or other overhead expenses, and has decided to permanently shut down its only tiles plant operations in Selayang.
Seacera said the permanent shut down may result in the group not having adequate level of operations to warrant continued listing on the bourse as well as financial impairment of up to RM24 million, which may affect its financial results for the financial year ending Dec 31.
In view of the developments above, Seacera expects its share price to be negatively impacted.
The stock fell 1.47% to 33.5 sen with 28.6 million shares done, making it one of the most actively traded stocks prior to the suspension in the trading of its shares at 3.30pm today. Trading in its shares resume tomorrow.
