Newsbreak: Undue preference in PDZ assets transfer

This article first appeared in The Edge Malaysia Weekly, on June 12, 2017 - June 18, 2017.

PDZ Mewah was transferred from Perkapalan Dai Zhun to PDZ last year

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A series of eyebrow-raising transactions over at PDZ Holdings Bhd late last year has raised suspicion that this may be a move by the shipping agency and vessels operator to secure its assets to prevent them from falling into creditors’ hands.

In fact, some would even go as far as to say that the transfer of assets from PDZ’s subsidiary to itself is a prelude to a “back-door purchase by an invisible hand” at a price below market value at a later stage.

“PDZ has the assets to sell to pay off the debts, but somebody wants to have the whole cake for himself by defrauding the creditors,” says a source involved in the battle to recoup the assets.

“This person is eyeing PDZ. He wants to get hold of PDZ — the listed vehicle, the vessels, the assets, the buildings, the business, and the listing status,” he tells The Edge.

To recap, PDZ sold its main operating unit, Perkapalan Dai Zhun Sdn Bhd, on Dec 30 last year to an offshore company, Salvage Point Ltd, for a mere RM1,000 in cash.

The owners of Salvage Point are not known. The only information provided is that it is a company incorporated in the Seychelles, an archipelago and country in the Indian Ocean.

Interestingly, prior to the disposal, the beneficial interest in PDZ Mewah — an ageing ship built in 1993 — was transferred from Perkapalan Dai Zhun to PDZ. The ownership change was reflected in the Registrar of Malaysian Ships, Port Klang, on Dec 6 last year and the vessel is now fully owned by PDZ.

It is learnt that PDZ Mewah, which is worth US$1.8 million (RM7.7 million), was transferred from Perkapalan Dai Zhun to its then parent company at RM4.6 million.

Meanwhile, a piece of land and buildings at Port Klang, which are worth some RM4.5 million, were also transferred from Perkapalan Dai Zhun to PDZ for RM2.6 million.

In other words, both transactions were done below market value.

Besides that, Perkapalan Dai Zhun’s containers and its land in Kuching were also sold to a third party.

Note that liquidators Datuk Heng Ji Keng and Andrew Heng of Baker Tilly were appointed via a court order to act for Perkapalan Dai Zhun on April 13.

In a nutshell, most, if not all, assets of Perkapalan Dai Zhun were transferred out of the company before liquidators were appointed by the creditors to make their debt claims.

Fortunately, according to legal and liquidation experts whom The Edge spoke to, PDZ’s transfer of assets from its subsidiary to itself falls within the six-month period prior to the commencement of its winding up.

Defined as undue preference under Section 528 of the Companies Act 2016, it is where preferential treatment or distribution is made to certain favoured creditors or trustees.

“If the disposal and transfer of assets were made within six months before liquidators are appointed, the creditors still have a good chance to claim the assets back. But the whole process could take about one to two years,” says a partner in an accounting firm.

Currently, PDZ’s main creditors are Dan-Bunkering (Singapore) Pte Ltd, CCK Petroleum Sdn Bhd, CCK Capital Ltd and CCK Petroleum (Labuan) Ltd, as well as Continental Platform (M) Sdn Bhd.

Collectively, the group’s two vessels owe at least RM4.22 million for bunkering.

As a result, one of the vessels, PDZ Mewah, was arrested on Jan 24 for non-payment of fuel supplies.

Last week, Eastgate Ventures Sdn Bhd, a new bunkering firm that has been supplying to PDZ’s vessels since January 2016, contacted The Edge and revealed that it is also one of the creditors.

“Our bunker claim amounted to US$550,000 (RM2.35 million) in total,” says its executive director Ferhad Iberhim.

Last June, Eastgate Ventures signed a memorandum of understanding (MoU) with PDZ for the takeover of its Bangkok-Kuantan-Sandakan route as the latter was unable to maintain payment for the bunker and the charter-hire fees of vessels.

“In return for our payment for the bunker and the charter-hire fees under the MoU, PDZ was supposed to reimburse through all the collection of revenues from all loading and discharging ports net costs. This did not happen, leading to the dissolution of the MoU and our claim for the return of all our funds disbursed under the MoU,” Ferhad explains.

“It is very clear that the move to sell Perkapalan Dai Zhun to Salvage Point for RM1,000 is just to get rid of the creditors. There is nothing for the creditors ... that shouldn’t be allowed in the first place. Legally, we are doing whatever we can to get back whatever they owe us,” he says.

In February, Shin Yang Shipping Corp Bhd and Harbour-Link Group Bhd also took legal action against PDZ Mewah.

Both companies served PDZ with writs in admiralty action in rem (action against the ship) to seek delivery of containers that were shipped on board PDZ Mewah by Perkapalan Dai Zhun, the former wholly-owned subsidiary of PDZ.

A month earlier, PDZ Mewah was arrested by Dan-Bunkering (Singapore) over the non-payment of supply of marine fuel oil and marine gas oil to the vessel. Dan-Bunkering supplies bunker fuels, lubricants and related products and services for vessels worldwide.