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March 6, 2008 |
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MEGAN MEDIA: Defaults on MYR899.96 Million Banking Facilities Megan Media Holdings Berhad and its subsidiaries had defaulted on MYR899.956 million (principal only) in maturing banking facilities. The Group continues to be saddled with debts procured from banks on the back of its trading business, which Investigative Accountants have now established as fraudulent. Measures taken to address the default * Following initial meetings with Creditor Banks on May 7, 2007, and May 11, 2007, the company is working with its Specialist Advisors, Sage 3 Capital Sdn Bhd that proposed the appointment of Investigative Accountants to investigate what its Advisors viewed as highly suspicious and irregular transactions. Pursuant to those meetings, the Creditor Banks proposed the appointment of Ferrier Hodgson MH Sdn. Bhd. as Investigative Accountants for the Malaysian operations; * PricewaterhouseCoopers, who were initially appointed by the company as Independent Financial Advisors to MJC in Singapore, have recently been appointed as Judicial Managers and will have responsibilities for managing and conducting investigations into the affairs of MJC in Singapore. This appointment was at the behest of the company and its specialist advisors; * Ferrier Hodgson has since reported their commercial findings to all Malaysian Creditor Banks and the company on July 30, 2007; * Legal proceedings initiated to recover all amounts lost due to the irregularities is on going given the quantum of the losses incurred. In this regard, the company is continuing to work with its Legal Counsel and Specialist Advisors; * The company has and will continue to adopt a consultative approach and has been in discussions with the Creditor Banks. The company, with support from its Specialist Advisors, forwarded a formal proposal to the Creditors Steering Committee on September 19, 2007, of a Comprehensive Debt Restructuring and Regularization Plans; * On October 26, 2007, the company presented a revised proposal to the Malaysian Creditor Banks with an exposure to the company and its subsidiary, Memory Tech Sdn Bhd. Further on October 30, 2007, Megan Media presented a formal proposal to Singapore Creditor Banks that have a corporate guarantee from the company; * In addition, the company had appointed OSK Investment Bank Berhad on October 29, 2007, to act as the advising merchant bank; * Further, the Board had announced on November 6, 2007, that the High Court of Malaya, Kuala Lumpur has granted the company and its wholly owned subsidiary, Memory Tech Sdn Bhd a Court Order to undertake a compromise or arrangement with its creditors or any class of creditors under Section 176(1) of the Companies Act 1965. The Court has further granted a Restraining Order under Section 176(10) of the Companies Act 1965 for 90 days effective from Nov. 6, 2007, until February 3, 2008; * Megan Media faced a more challenging business environment in late December 2007 and early January 2008. Further, several key management personnel crucial to the debt restructuring plans tendered their resignation. Prior to that, the company was on track in meeting its operational targets, was able to meet its short term cash flow requirements and had sufficient funds to continue its operations. * The Board deliberated the issues and decided to refer the matter to all Creditor Banks and a meeting was convened on January 25, 2008. Following the meeting, several Creditor Banks reverted in support of the continuance of the Restraining Order but the company was unable to garner the requisite majority to obtain an extension of the Restraining Order. As the company is unable to secure the requisite majority support from Scheme Creditors for the extension of the Restraining Order or to pursue a scheme of arrangement with creditor banks, the Board has resolved, in good conscience, that it will not resist any winding up action initiated by any creditor. The Board is of the opinion that the appointment of a Court appointed Liquidator is imminent and as such decisions with regard to dealing with the financial condition of the Company are best pursued by a Liquidator. Accordingly, the Board has withdrawn the Certificate of Solvency (dated May 9, 2007) issued to Bursa Malaysia Securities. As announced by Megan Media on February 26, 2008, the High Court of Malaya at Kuala Lumpur has made an order for the appointment of Cho Choo Meng and Mohd Anwar bin Yahya of PricewaterhouseCoopers Malaysia as Provisional Liquidators of MTSB on February 26, 2008. Financial and legal implications in respect of the default in repayments: The Creditor Banks have called an event of default and Mayban Trustees Berhad, acting for the MYR320 million BAIDS bondholders, have on September 19, 2007, served the company's wholly owned subsidiary, Memory Tech Sdn Bhd, a winding-up petition. The petition will be heard on March 5, 2008. There is a writ of summons relating to Bank of East Asia Limited's claim for USD79,500 and SGD2,924,399.98 in outstanding facilities incurred by MJC for which the company is being sued as a Corporate Guarantor. The mention date has been fixed for April 16, 2008. Megan Media has since been similarly served with a writ of summons by KBC Bank N.V., Singapore Branch on July 20, 2007, for outstanding debts of USD3,007,325.59 incurred by MJC. The mention pending settlement date has been fixed for March 6, 2008. There are several other creditors who have filed winding up petitions against the company and its subsidiary which are at various stages of action. Megan Media Holdings Berhad's principal activities are manufacturing and trading data storage media products like Computer diskettes, video cassette tapes, compact disc recordable (CD-R's) and digital versatile disc recordable (DVD- R's). The Group operates in Malaysia, Singapore and other countries. The Troubled Company Reporter-Asia Pacific reported on June 11, 2007, that the Rating Agency Malaysia downgraded the long-term rating of Memory Tech Sdn Bhd's MYR320 million Bai Bithaman Ajil Islamic Debt Securities (2005/2012) ("BaIDS"), from C3 (with a negative outlook) to D. The BaIDS carries a corporate guarantee from MTSB's holding company, Megan Media Holdings Berhad. Concurrently, RAM has lifted the Rating Watch (with a negative outlook) that had been placed on MTSB on May 9, 2007, following the failure of MTSB and MJC (Singapore) Pte Ltd, another wholly owned subsidiary of Megan Media, to repay their trade facilities amounting to MYR47.36 million. On June 19, 2007, the company was classified as a PN17 company, and was given eight months to submit a substantive plan to regularize its financial condition. |
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