This article first appeared in The Edge Financial Daily on February 20, 2018

KUALA LUMPUR: JAKS Resources Bhd is filing an injunction in the High Court to restrain two financial institutions from releasing a RM50 million bank guarantee to Star Media Group Bhd in relation to an agreement for the purchase of a piece of land in Section 13, Petaling Jaya, for RM135 million.

The irrevocable and on-demand bank guarantee was made as security to ensure JAKS Island Circle Sdn Bhd (JIC) — a 51%-owned unit of JAKS — completes and delivers Tower A, a 15-storey office block, to be constructed on the land, within three years from the vacant possession date or the date of approval of the plans for the tower.

The RM50 million bank guarantee comprises guarantees of RM25 million each from two financial institutions. One guarantee expired on Feb 15, while the other will be expiring on April 15, unless an extension is granted.

JAKS said Star Media has informed the group that it is not granting an extension for the bank guarantee. Instead, Star Media gave notice to the two issuing financial institutions on Feb 15 to call on the bank guarantee, which means that JIC will have to pay the RM50 million sum to the issuers.

“The board of directors of JIC has since instructed its solicitors to file with the High Court in Kuala Lumpur an injunction [either on an ex-parte basis or if the court so directs, an inter-parte basis] to restrain the issuing financial institutions of the bank guarantee from releasing, and the beneficiary of the bank guarantee, i.e. Star Media from receiving, the proceeds of the bank guarantee,” said the company.

JAKS said the call on the bank guarantee is baseless, adding that JIC has valid grounds for the court to grant the injunction, as it said Star Media had prevented the completion of Tower A.

JAKS said the injunction does not affect its ongoing business operations.

To recap, the sale and purchase agreement followed a joint development agreement signed between JIC and Star Media in 2010 for a RM370 million gross development value mixed development project to be constructed on the piece of land.

The mixed development entails two office blocks, a commercial cum educational block and a residential block.

JIC shall be entitled to saleable office units in the development, being the higher of 70% of gross development value (GDV) or RM259 million, while Star Media will be entitled to saleable office units being the higher of 30% of GDV or RM111 million. In the event that JIC is successful in increasing the plot ratio, Star Media shall be entitled to a further 5% of the increase in the GDV.

JAKS’ share price gained four sen or 2.22% to RM1.84 yesterday, translating into a market capitalisation of RM895.91 million.

Star Media fell one sen or 0.72% to close at RM1.37, giving it a market capitalisation of RM1.01 billion.