After explosive revelations of all that transpired at Linear Corporation Bhd, perhaps the immediate question on investors’ minds is whether the beleaguered company will soon see some light at the end of the tunnel.
Linear yesterday announced to Bursa Malaysia that it has been classified as a Practice Note 17 (PN17) company due to a default in payment and it “is now unable to provide a solvency declaration to Bursa Securities”. Linear is now required to submit a regularisation plan to both the Securities Commission (SC) and Bursa Malaysia Securities for their approvals.
Notwithstanding this latest setback which adds to Linear’s long list of woes since the King Dome debacle, it is understood that the company already has a turnaround plan in mind, which will be spearheaded by its new directors.
On May 7, Linear appointed three new directors — executive directors Yap Chee Keong and Saw Heng Soo, and non-executive director Neoh Chee Kean.
The Edge Financial Daily learned that Yap has experience in turning around PN17 companies.
“Yes, I am confident of cleaning up this mess in Linear. The current immediate task is fire fighting and ironing out the issues in Linear first,” Yap said in a phone interview yesterday.
In his most recent restructuring stint, Yap was tasked with cleaning up then financially distressed Kiara Emas Asia Industries Bhd, now known as Major Team Holdings Bhd, listed on the Main Market. “My task in Major Team was to restructure its bank debts and its debts with trade creditors,” Yap added.
Kiara Emas’ (AR) announcements to Bursa Malaysia showed that Yap was appointed on Aug 1, 2003 as the group’s managing director before he resigned in April 30, 2004. Yap said his short tenure there was because his job was only to restructure the debt. He left immediately after that.
“That’s my style,” he quipped.
Kiara Emas’ restructuring exercise was completed on Nov 17, 2003, and its listing was transferred to Major Team on the same day.
Linear’s announcement on Yap’s appointment on May 7 stated that “Yap had gained auditing experience in England from 1978 to 1981. He also has extensive financial experience gained from his career in merchant banking from 1981 to 1997 with Bumiputra Merchant Bankers Bhd”.
“Yap is now a financial adviser and company director. He has (before this) served as a director of several public-listed companies,” according to the company.
It is understood that Yap, along with Linear’s executive director Mevin Nevis A/L AF Nevis and its chief operating officer Clive Vincent Nelligan will spearhead efforts for its corporate restructuring exercise.
Sources close to Linear’s restructuring plans told The Edge Financial Daily that Linear is expected to be out of PN17 “within 12 months”. The turnaround plans include divestment of its main asset — its factory in Prai, Penang, which Linear will lease back from the buyer.
It is learned that that company is currently “in talks with potential buyers” to sell the factory to generate cash. The pricing is unknown, although Linear’s March 31, 2010 balance sheet shows it had property, plant and equipment valued at RM2.5 million.
On June 22, Linear informed Bursa that it was selling its 40% equity stake in a joint venture company, Boustead Linear Corporation Sdn Bhd to Mutiara Rini Sdn Bhd for RM2.5 million because it needed “to raise cash on an urgent basis to address (its) liquidity problems”.
The purpose of the joint venture was to construct, own and operate a district cooling plant to supply chilled water for air-conditioning services to The Curve, the Royale Bintang Damansara Hotel and e@Curve.
From the cash raised, Linear said it would spend RM100,000 to complete all outstanding works and rectification of minor defects to the plant, and would use the balance of RM2.4 million as working capital for on-going business activities, including for the payment of operating costs and overheads.
The second step in the corporate restructuring involved resolving other outstanding issues. One of these is related to terms of a contract by Linear’s subsidiary District Cooling Systems Sdn Bhd to supply chilled water to AEON Co (M) Bhd. Sources say Linear was “very close” to resolving this matter with D Aseania (another party to the tripartiate agreement) and AEON, in Linear’s favour.
The Edge Financial Daily was informed that Linear would then move ahead with the restructuring of its loans with the banks to gain new sources of cash flow — and this effort will be spearheaded by Yap.
This article appeared in The Edge Financial Daily, June 24, 2010.
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