KUALA LUMPUR: Sarawak-based Ngiu Kee Corp Bhd (NKCB) has defaulted on outstanding loans amounting to RM13.96 million due to insufficient funds, resulting in the supermarket operator being classified under the regulator’s Practice Note 17 (PN17) category.

The loan, taken by wholly owned unit Ngiu Kee Sdn Bhd (NKSB) was due on Wednesday to Bank Islam Malaysia Bhd, NKCB told the Bursa Malaysia Securities yesterday.

“The company (NKCB) does not have sufficient funds to meet the payment due amounting to RM13.96 million as at yesterday.

“Prior to the default in payment, the company has been in regular negotiations with the financial institution to reschedule the loan. The company will continue to engage the financial institution for their consideration to agree to our proposal,” NKCB said.

The outstanding RM13.96 million loan follows an earlier settlement of RM4.32 million by NKCB to Bank Islam. NKCB said it was unable to ascertain the business, financial and operational impact of the default on the company for the time being.

NKCB said it would not be able to meet its debt obligations to Bank Islam as and when they fell due within the next 12 months. However, the supermarket operator said it would be able to fulfil its trading commitments to its suppliers.

The default will empower the debenture holder to appoint a receiver to NKSB which also has outstanding loans of RM34.39 million from CIMB Bank Bhd.

Shares of NKCB was last traded unchanged at 11.5 sen on Wednesday for a market capitalisation of RM7.9 million. The stock has fallen 46.51% this year, underperforming the FBM KLCI’s 2.8% gain. Bank of New York Mellon Corp is the single largest shareholder in NKCB with a 9.52% stake.

This article appeared in The Edge Financial Daily, July 2, 2010.