KUALA LUMPUR (May 5): Financially-troubled Megasteel Sdn Bhd, a 79%-owned subsidiary of Lion Corp Bhd, today obtained a three-month restraining order against its creditors after it defaulted on RM3 billion worth of loans last year.

In a filing with Bursa Malaysia today, Lion Corp said the order granted by the High Court restrains any further proceedings against Megasteel, Lion Corp, and their assets for 90 days from today except with the court's permission.

"The restraining order was applied for in order to allow Megasteel to have sufficient time to formalise the schemes of arrangement for the approval of the scheme creditors.

"Megasteel is currently working with its adviser on the schemes of arrangement and the details of the schemes of arrangement will be announced in due course," said Lion Corp.

The court also granted Megasteel an order, pursuant to section 176(1) of the Companies Act 1965, whereby separate meetings of the company's creditors be summoned within a period of 90 days from today to agree on a scheme of arrangement.

Lion Corp announced in September last year that Megasteel had cross defaulted on RM3.02 billion worth of loans.

Megasteel, it said, was unable to meet its payment for the banker's acceptance due on Sept 23 in respect of a working capital facility, triggering a cross default.

Lion Corp said Megasteel had been operating under a difficult environment due to the rampant importation of steel products into the country at dumping prices and as a consequence, Megasteel has been suffering losses for several years, resulting in the default.

Lion Corp said the banker's acceptance default will give rise to a default by virtue of the cross default provision under principal loan documents relating to a RM21 million term loan facility agreement, RM683 million worth of syndicated term loan facilities agreements, RM119.5 million worth of bilateral working capital facility agreements and RM2.2 billion worth of ringgit-denominated bonds, US dollar-denominated debts, as well as redeemable convertible secured loan stocks issued by Lion Corp.

Lion Corp had said upon default, the respective lenders will have the right to declare the cancellation of the banking facilities and all sums outstanding under the respective loan documents shall become due and payable immediately.

Lion Corp had said the measures taken to address the default in payment relates to its regularisation plan that is yet to be submitted to Bursa Malaysia.

It had added that the regularisation plan would include the securing of potential investors to strengthen the operational and financial position of Megasteel, as well as a petition for the implementation of effective trade defence mechanism by the government.

In its filing today, Lion Corp, a Practice Note 17 company, said the restraining order is not expected to have a material impact on the financial and operational matters of the group.

Lion Corp shares closed unchanged at 4.5 sen, with a market capitalisation of RM52.23 million.