(In Statutory Management)
Report to Equiticorp Holdings Ltd debenture stockholders
Dated 28 June 2016
At the time of our last letter, we were about to enter into legal proceedings to replace the Malaysian Government's Official Receiver as the liquidator of City Centre Sdn Bhd ("CCSB"), the owner of a large block of land in central Kuala Lumpur. We put forward a proposed replacement liquidator, the independent international accounting firm Deloitte, and 2 other creditors put forward their own nominees.
The High Court hearing took place on 5 October 2015. The judge heard the arguments of all the parties and agreed that the Official Receiver had failed to comply with the court order we had obtained in January 2015 to appoint 2 international real estate firms to conduct a tender of the property. The judge gave the Official Receiver one final chance to comply with the court order within 3 weeks.
At the 26 October callback, the Official Receiver had done nothing and agreed to step down. The judge considered the 3 proposed replacements and appointed our nominee as the liquidator. The Official Receiver was instructed to hand over all CCSB's accounting records and files to the new liquidator within one month.
The new liquidator called for a meeting of the Committee of Inspection on 15 December 2015.
One of the 5 Committee of Inspection members was disgruntled with matters and resigned from the committee. He filed a court application to dissolve the Committee of Inspection. He claimed that Mr Cheah and his brother had been trying, with the involvement of some committee members, to complete a scheme of arrangement to sell CCSB's property directly to a Chinese purchaser. As part of the scheme, a refundable deposit was paid by the Chinese purchaser to a solicitor's trust account. The scheme never eventuated but the deposit was not refunded.
It was alleged that Mr Cheah's brother and 2 lawyers had dishonestly taken receipt of the deposit moneys, a sum of 10 million Malaysian ringgits (approx. NZ$3.5 million). We had no knowledge of this until an affidavit was filed in court presenting the information and documents, including a police complaint report.
The application to dissolve the Committee of Inspection was dismissed as being groundless by the High Court.
The Committee of Inspection meeting took place as scheduled on 15 December 2015 with the 4 remaining committee members. The committee confirmed to the new liquidator that they stood behind the January 2015 court order to appoint 2 international real estate firms to jointly conduct a tender of the property.
The liquidator appointed the real estate agents in February 2016 and the tender opened in March 2016.
The property was marketed widely throughout Asia as well as locally in Malaysia. Very good press coverage was obtained, with 3 articles appearing in the business and property pages of the major Kuala Lumpur newspaper during the tender period.
While the marketing campaign went well, the general property market has been showing signs of slowing in Malaysia over the last couple of years.
The tender closed at the end of May 2016. The liquidator called for a Committee of Inspection meeting on 21 June 2016.
The liquidator is currently in post-tender negotiations with a number of interested parties. Due to commercial sensitivities and the availability of our reports on the internet, we are not at liberty to disclose any information about the property negotiations at this time.
It may take some months for a sale to be concluded and then settlement would usually follow in 60 or 90 days. Following that, the liquidation process would need to be completed at CCSB level and its parent company, where there are still outstanding creditor issues to resolve.
The liquidator of the parent company has also been advised that a charging order has been placed over the 18% shareholding owned by Mr Cheah's brother. This relates to another attempted scheme by the Cheah brothers to sell the CCSB property without the liquidator's authority and the dishonest withholding of a refundable deposit paid by a Singaporean company. This took place about 18 months before the attempted scheme with the Chinese purchaser, referred to above.
Following the liquidation of the 2 companies in Malaysia, any funds will have to flow through the bankrupt estate of Mr Cheah, which is under the control of the Official Assignee in Singapore.
Consequently, we are unable to give an estimate of the quantum and timing of any further possible distribution to debenture holders.
2. Next report
We will write again in 12 months time, around 30 June 2017, or sooner should the need arise.
B G Stowell
Statutory Manager
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