KUALA LUMPUR (Oct 5): Beleaguered steelmaker Lion Diversified Holdings Bhd is selling an office cum factory for RM30.5 million. Most of the proceeds from the sale will be used as working capital and some to settle part of its outstanding debt owed to the purchaser.

Lion Diversified will then lease back the property from the new owner, Sritama Jetty Sdn Bhd.

In a filing with Bursa Malaysia today, Lion Diversified said its wholly-owned subsidiary CPB Enterprise Sdn Bhd signed a sale and purchase agreement with Sritama Jetty. The property, comprising a two-storey office building and a single-storey detached factory, sits on a 4.013-ha land in Mukim Cheng, Melaka.

"The property was acquired by CPB Enterprise in 2007 at a purchase consideration of RM16.8 million," Lion Diversified revealed.

The consideration price of RM30.5 million excludes the 6% goods and services tax (GST) charge of RM1.83 million, said Lion Diversified.

Another of its wholly-owned subsidiary, Likom Caseworks Sdn Bhd, will rent the property from Sritama Jetty for three years soon after the sale is completed, which is expected to be by the second quarter of next year. The rental is set at RM171,562.50 a month, excluding GST.

The rental agreement can be renewed for another two three-year terms, said Lion Diversified. The leasing fee rises to RM184,270.83 a month in the first renewal term, and RM196,979.17 per month in the final term.

Lion Diversified will use RM8.22 million from the sale proceeds to pay off the amount owed to Sritama Jetty. After deducting real property gains tax, Lion Diversified will channel the remaining RM21.37 million for its working capital within one or two years.

"The proposed sale and leaseback is not expected to give rise to any gain or loss to the Lion Diversified Holdings Bhd Group as the transaction is a finance lease," the statement read.

Lion Diversified shares fell by half a sen to close at three sen today, bringing its market capitalisation to RM41.76 million.