KUALA LUMPUR: Asia Petroleum Hub Sdn Bhd’s (APH) bunkering island project is to be tendered out to the highest bidder in an attempt to rescue the project, sources said.
It is learnt that the wheels were set in motion in May by APH’s receiver and manager PricewaterhouseCoopers (PwC) after a failed attempt to restructure the company which has been taken over by creditors.
On Tuesday, CIMB Bank Bhd, which is owed some RM1.01 billion by APH, withdrew its support for a restructuring scheme that also included Muhibbah Engineering Bhd.
Muhibbah is the main subcontractor for the APH project and has put in work worth RM381 million in building a petroleum hub and bunkering facility on a reclaimed island off Tanjong Bin, Johor.
Under the original restructuring plan, CIMB and Muhibbah are to convert their debt into equity and a new shareholder is to come in with fresh funds that would be used to complete the project.
CIMB was the principal financier for the APH project and had set aside a RM1.4 billion three-year bridging loan out of which some RM840 million had been drawn down.
Sources say there are several suitors for APH but pricing would be a problem.
“Hence, by CIMB withdrawing its support, it is paving way for a tender or bid process to be done to get the best price,” said the source.
He also said it does not make sense for CIMB to go ahead with the restructuring scheme and end up with a stake in APH as it is banking institution and not a venture capitalist.
According to an analyst who is familiar with the project, the bunkering island is still under the Federal Lands Commissioner and APH has yet to secure a long term lease, which is a major stumbling block to any restructuring.
He also said with CIMB’s withdrawal of support from the restructuring scheme, Muhibbah will now come under pressure to provide for the sum in its balance sheet.
“They should have a few more months to see how this pans out but looking at their accounts, the provision would likely hit their reserves but it is not something that their balance sheet cannot handle,” he said.
Muhibbah has filed a legal suit against APH and main contractor ZAQ Sdn Bhd to recover the RM381 million due.
It has to date not managed to provide for the amount due although work on the bunkering island project had stopped over a year ago.
APH is 90%-owned by KIC Oil and Gas Sdn Bhd while the remainder by Umno-linked Trek Perintis Sdn Bhd. To date, the bunkering island project is reported to be 60% completed and, according to reports, will require an additional RM1 billion to bring it to completion.
In a filing with Bursa Malaysia yesterday, Muhibbah said that as at Dec 31, 2011 the company’s entitled receivables in respect of construction works done for APH which have been duly certified by APH is RM399.5 million and the amount of claims pending certification is an additional RM7.5 million.
Muhibbah also pointed out that the project was backed by the federal government which issued the development order and approval for site possession and commencement of work to APH in 2006/2007 to develop the petroleum hub and bunkering facility on a 100-acre (40ha) reclaimed island pending land lease details to be finalised between the government and APH.
Nonetheless, according to the group, the land lease issue has remained unsolved to date despite substantial financing and work that has been poured in.
“The company has a direct corporate guarantee from APH and is currently evaluating all possible courses of action to recover the receivables.
“After having taken into account the provisions and adjustments that have already been made in the audited accounts in the previous years, the remaining net additional full impact on the group’s shareholders’ funds, if any, is estimated at RM245 million,” said Muhibbah.
Muhibbah was one of the top losers yesterday, shedding 18 sen to close at RM1.02 with a total of 31.2 million shares traded.
The article is appeared in The Edge Financial Daily on 28, June 2012.