KUALA LUMPUR (Aug 1): Media Prima Bhd and Hong Leong Industries Bhd have announced that their associated company, Malaysian Newsprint Industries Sdn Bhd (MNI), has initiated creditors' voluntary winding up proceedings.

In separate filings to Bursa Malaysia, the two groups said MNI has appointed Lim San Peen of PricewaterhouseCoopers Advisory Services Sdn Bhd as the interim liquidator of the exercise.

"The board of MNI was of the opinion that MNI could not continue its business. MNI had been operating under very difficult market conditions, especially declining newsprint demand, and has incurred losses for the past three years," said Media Prima and Hong Leong Industries.

MNI, which is principally engaged in the manufacture and sale of newsprint, is an indirect associate of Media Prima via its 98.17%-owned The New Straits Times Press (M) Bhd (NSTP), which in turn holds 21.36% direct equity interest in MNI.

Meanwhile, Hong Leong Industries and Norwegian company Norse Skog Papers (M) Sdn Bhd each has a 33.65% stake in MNI, while another investor, Rimbunan Hijau Group — which is controlled by Sarawak billionaire Tan Sri Tiong Hiew King, owns an 11.34% stake.

Additionally, MNI is also the largest supplier for Media Chinese International Ltd, which owns Ming Pao, Sin Chew Daily, and Nanyang Siang Pau, among others.

The Edge Malaysia had on July 26 reported that MNI shareholders have been seeking assistance from various channels to help it secure loans from financial institutions as its financials were deteriorating.

For the financial year ended June 2016 (FY16), MNI booked a net loss of RM19.44 million from RM435.32 million in sales, marking the second consecutive year of losses following a net loss of RM17.01 million and revenue of RM405.5 million in FY15.

At the end of FY16, MNI's non-current and current assets totalled RM696.41 million and RM84.71 million respectively, while long-term debt commitments reached RM219.08 million, with no short-term borrowings. It also recorded negative reserves of RM150.67 million.

Apart from the two losses in FY15 and FY16, MNI had only noted one year of losses, amounting to RM12.61 million, in FY08. It managed to salvage itself with net profits of between RM8.5 million in FY10 and RM66.34 million in FY09.

Media Prima said the group will make a full impairment of RM142.4 million arising from the liquidation process, which is its carrying amount of investment in MNI as at end of FY17. This, it added, will adversely impact its financial results for the final quarter of FY17.

"Apart from the one-off impairment, the liquidation of MNI will not have any other adverse impact on the group, and going forward, the group will no longer have to equity account the results of MNI," said Media Prima.

Meanwhile, Hong Leong Industries said it will make a full impairment provision of RM171.5 million.