KUALA LUMPUR (June 26): Candy manufacturer Khee San Bhd has engaged the service of BDO Governance Advisory Sdn Bhd to review the validity of Khee San's purchase orders, invoices, and other relevant documents used as a basis to draw down financing from its bankers.
Khee San told Bursa Malaysia in a filing yesterday that BDO would also trace the movement of funds from the receipts of the financing drawdown.
"The above scope of work shall cover the period from Oct 1, 2018 to March 31. This engagement shall commence immediately from the day hereof (June 25) and shall continue until the completion of the exercise.
"The company expects to complete this engagement within six weeks from the date hereof and the findings may, pursuant to the terms of this engagement, be announced accordingly for public record," Khee San said.
Khee San and its subsidiary Khee San Food Industries (KSFI) have defaulted on the group's loan repayment to Alliance Bank Malaysia Bhd.
In an amended Bursa filing yesterday, Khee San said Alliance Bank has taken legal action against Khee San and KSFI to claim, among others, a sum of RM4.7 million.
Khee San said the company had on Monday (June 22) received the writ of summons together with the statement of claim filed by Alliance Bank’s lawyers from Messrs Benjamin Dawson.
Khee San said its lawyer from Messrs Krish Maniam & Co (KMC) has advised the company to file the necessary defence against the writ of summons and to proceed with a counterclaim. KMC has given its legal opinion that the probability of success is fair for both in establishing the defence and the success of the counterclaim, according to Khee San.
According to Khee San, the loan default is linked to the group’s intention to restructure its bank loan facilities.
"The company had intended to restructure the facilities through its previously announced corporate exercise which entailed a subscription issue and right issue (proposals) as per announcement dated Dec 2, 2019 and Jan 6, 2020. The company had at that time engaged in discussions with all its bankers including ABMB (Alliance Bank). However, given the recent departure of the previous subscriber as per announcement dated June 3, 2020, the previous proposed settlement efforts had lapsed accordingly, resulting (in) the company (being) in this default in payment position.
"Despite the termination of the proposals as per the company’s announcement on June 3, 2020, the company is concurrently putting together a new corporate proposal with other potential investors, which shall be in line with the previous proposals. This new proposal shall holistically address the outstanding balances with all its bankers, ABMB included, creditors (trade and non-trade) alongside additional working capital to further strengthen the company cash flow position. The company expects to make the requisite announcement in the coming weeks once the new proposal crystallises,” Khee San said.
Khee San’s terminated proposals involved a planned private placement of 94 million new shares in the company at 25 sen each to food and beverage manufacturer Mamee-Double Decker (M) Sdn Bhd.
According to Khee San’s Bursa filing on Dec 2, 2019, the proposals included a renounceable rights issue of 208.4 million new Khee San shares on the basis of one rights share for one existing unit after the completion of the private placement.
Based on the private placement share subscription price of 25 sen each and the indicative issue price of 18 sen per rights share, the proposals were expected to raise gross proceeds of approximately RM61 million, Khee San said.
Khee San said it planned to allocate RM45 million of the gross proceeds to repay trade and other creditors.
On June 3, 2020, Khee San said the private placement subscription agreement was effectively terminated because the period to satisfy the conditions precedent under the agreement had lapsed, and the parties involved had mutually agreed not to extend the cut-off date.
Khee San has reported losses. For the 12 months ended Dec 31, 2019, the company said net loss stood at RM76.49 million on revenue of RM129.35 million.
The company, where London Biscuits Bhd used to be a major shareholder, said there were no comparative figures following the change in Khee San's financial year from June 30 to Dec 31.
London Biscuits had on Nov 29, 2019 ceased to be a substantial shareholder in Khee San after selling its entire 20.8 million shares or 20% stake in Khee San on the open market.
At Bursa today, Khee San shares were traded one sen or 3.85% higher at 27 sen at 3:01pm for a market value of RM30.32 million.
Khee San’s latest reported net assets per share stood at 66 sen.