This article first appeared in The Edge Malaysia Weekly on March 11, 2019 - March 17, 2019

IN a new development, Joey Lim Keong Yew and Benjamin Lim Keong Hoe, the grandsons of the late casino kingpin Tan Sri Lim Goh Tong, have lost their flagship, Australia-listed Donaco International Ltd, according to filings with the Australian Securities Exchange.

The Edge understands that the brothers had some sort of funding arrangement with OL Master (Singapore Fund 1) Pte Ltd, a hedge fund operated by OCP Asia Ltd, which resulted in the group controlling 37% of Donaco.

Keong Yew and Keong Hoe are the sons of the late Datuk Lim Tee Keong, who passed away a bankrupt in October 2007. Tee Keong was Goh Tong’s fourth child and oldest son.

In a filing with the exchange on March 4, Donaco says, “Vincent Pirina and Mitchell Mansfield have been appointed as joint and several receivers of approximately 224 million shares (about 27%) in the company. The shares were formerly controlled by the Lim family.

“The appointment of receivers was made by Madison Pacific Trust Ltd as security trustee for OL Master (Singapore Fund 1) Pte Ltd, pursuant to certain financing agreements with entities controlled by Joey Lim (Keong Yew),” the announcement says.

It goes on to say that the appointment of receivers may have an impact on the company’s loan agreement with Mega Bank. It is possible that Mega Bank may regard this as a “change of control” under the terms of the loan agreement. If so, the loan may become due and payable sooner than the current scheduled repayment dates. The company will discuss this issue with Mega Bank and keep the market informed of all developments.

The filing also said that Donaco’s board has agreed that Keong Hoe will remain as interim managing director and CEO until the end of March.

The changes in shareholding are pursuant to Section 608 (1) of the Corporations Act Australia 2001, which, in a nutshell, explains that a person has a relevant interest in securities if he is the holder of the securities, or has power to exercise, or controls the exercise of, a right to vote attached to the securities, or has power to dispose of, or control the exercise of a power to dispose of, the securities.

Pirina is a principal from Veritas Advisory while Mansfield is a director at restructuring, insolvency and forensic accounting firm, Borrelli Walsh.

On March 1, Donaco announced that OCP Asia changed its shareholding in Donaco, taking control of 224.46 million shares or 27.25% of Donaco.

OCP Asia took up a 7.16% stake or 50 million shares in Donaco in mid-December last year but by the end of the month, had 77 million shares or 9.35%.

OCP Asia also acquired some shares from the open market, nudging its shareholding up to 37%.

A check on Donaco’s annual report indicates that as at end-August last year, Keong Yew controlled 28.10% of Donaco and had 13.03% jointly held with Keong Hoe.

There have been a lot of problems at Donaco lately.

In December last year, Keong Yew sought a three-month leave of absence from his position as CEO and MD of Donaco “to deal with health and personal matters”.

An announcement to the Australian Securities Exchange had it that “as a temporary measure”, Keong Hoe had been appointed interim MD and CEO of Donaco.

In a press release, Donaco chairman Stuart McGregor said, “The board is very pleased that Ben Lim has agreed to step up as a senior executive and lead the company through this period of transition. We also congratulate Joey Lim on recognising his need to focus on his personal wellbeing and health, and wish him all the best for a speedy recovery.”

The congratulations from the chairman seemed odd.

Nevertheless, Donaco’s share price has taken a beating, hitting a multiyear-low of 3.6 Australian cents on Dec 12 last year, translating into a market capitalisation of A$32.94 million, down from about 18 cents a month before (market capitalisation of A$148.25 million). At its peak in March 2014, Donaco was trading at A$1.47.

Donaco closed last Thursday at seven Australian cents, translating into a market capitalisation of A$57.7 million.

To recap, Donaco has two main assets — Star Vegas Resort and Club in Poipet, Cambodia, and Aristo International, a hotel with an adjoining casino in Lao Cai, Vietnam.

A thorn in Donaco’s side has been a US$39.9 million facility by Taiwan’s Mega International Commercial Bank Co Ltd, secured only against the assets of the Star Vegas business.

News reports from Australia indicate that Donaco is at loggerheads with some Thai businessmen, the previous owners of Star Vegas. According to Donaco, the three former owners have breached an agreement with it by running competing casinos.

At present, the dispute is with arbitrators in Singapore where Donaco is seeking US$190 million in damages, as well as in the Cambodian courts. In Cambodia, Donaco obtained a preliminary injunction in December 2017 ordering the closure of the two competing casinos. However, the Cambodian Court of Appeal overturned it. News reports have it that the injunction was never enforced.

The arbitration in Singapore is slated to be heard at the end of July.

Meanwhile, Aristo International has its own set of problems with patrons being threatened by a Chinese crime syndicate to get them to visit the casinos it controls.

These issues have weighed on the company’s financials. Donaco suffered a net loss of A$124.5 million (US$91.1 million) in the financial year ended June 2018, which took into account an impairment charge of A$143.9 million in the value of the casino licence of Star Vegas, thanks to the disputes.

It will be interesting to see what happens to the siblings’ block of shares in Donaco and how an ongoing family feud will be impacted. Keong Yew, Keong Hoe and their sister, Marie Lim Seok Leng, are currently involved in several acrimonious disputes with their uncles, Tan Sri Lim Kok Thay and Datuk Lim Chee Wah. They are the second and youngest sons of the late Goh Tong.

Kok Thay is chairman and chief executive of the multibillion-ringgit casino and resort operator Genting Bhd, which also has assets in plantations, oil and gas and other ventures, but Chee Wah holds no position in any of the Genting companies.

There are several ongoing court cases but the two main fights involve the will of the late Tee Keong while the second is centred on the removal of Keong Hoe and Seok Leng as beneficiaries of the Tee Keong Family Trust, a discretionary trust set up by Goh Tong in 1990 for his eldest son and his family.

Court documents indicate that Tee Keong, who was married to Agnes Tan Bee Gaik, had a relationship with Joanne Fok Chan Kok. He had two children — Kenneth Lim Keong Wye and Katherine Lim Seok Yan — with Fok.

Keong Yew and Keong Hoe were not named as beneficiaries in Tee Keong’s will and the two are challenging its validity.

Their mother Agnes was given 10% of Tee Keong’s estate and their sister Seok Leng another 10%, but the bulk was left to his children with Fok — Keong Wye was given 60% and Seok Yan was given 20%.

Tee Keong’s will was signed on March 11, 2014, about a month before he passed away. Kok Thay and Chee Wah were executors of the will.

The second dispute stems from the late Goh Tong’s setting up of the Tee Keong Family Trust under a trust deed dated May 18, 1990.

While it is not clear what assets are held under the trust, Keong Hoe and Seok Leng were removed as beneficiaries. They contend in their suits that the Tee Keong Family Trust was created and established for the benefit of Tee Keong, his family members as well as his descendants. They further allege that they were wrongfully removed as beneficiaries.

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.