Spooked by the spectre of Oilcorp Bhd slipping into Practice Note 17 (PN17) status, investors sold down the stock yesterday, loping as much as 20% off the share price before the counter closed at 26.5 sen, a fall of 5 sen or 15%.
Last Friday, Oilcorp said it had failed to make an interest payment of RM1.6mil because it did not have sufficient funds due to the delay in collecting certain large receivables.
Trading in the stock was halted the same day and resumed yesterday. Oilcorp was one of most heavily traded counters for the day.
Investors’ fears were confirmed when the company announced after 5pm that it was an affected issuer under PN17 of Bursa Malaysia’s listing requirements because it had defaulted on the interest payment and could not provide Bursa with a solvency declaration.
Under the PN17 rules, the company is obliged to regularise its financial conditions within a certain timeframe or face delisting.
Oilcorp also said it did not have a formal regularisation plan at present, but it would shortly appoint a principal adviser to formulate such a plan. It added that it would continue to negotiate with its lenders.
On Friday, it said the interest payment was part of the facility agreement between EON Bank Bhd, Capone Bhd and Oilcorp under a primary collateralised loan obligation (CLO).
“The company had on Sept 15 written to Malaysian Trustees Bhd to seek indulgence of time of up to one month from the due date to remedy the matter,” Oilcorp said, adding that the lender and trustee had yet to declare Oilcorp in default under the facility agreement.
If such declaration of default were made, the CLO would be immediately payable together with the accrued interest, it said, adding that such default would impact business, financial and operations.
Oilcorp expects to resolve the issue if given the indulgence period, as it is pursuing the payment of receivables. The options available to lenders would be to issue legal proceedings against the company.
The company is seeking legal advice as to whether such a default constitutes an event of default under any other loan agreements.
“The directors are unable to form an opinion that the company will be able to meet its debts as they fall due and accordingly the company is not solvent,” Oilcorp said.
Last Friday also saw the resignation of two of the company’s non-executive and independent directors Tuan Raime Unggi and Sim Ti. They are also members of the audit committee. Oilcorp now has only one independent director.
The company, which is involved in oil and gas, special projects, hotel, resort operation and property investment, and deep-sea fishing, is heavily geared with net debt of RM421.8mil as at end-June.
Malaysian Rating Corp Bhd (MARC), in an email reply to StarBiz, said Oilcorp’s liquidity position was very weak and it had limited options to stabilise its credit profile.
Oilcorp had relied on its moving receivables from oil and gas majors as a source of liquidity, it said, adding that the company was unlikely to be able meet its obligations unless it quickened its trade receivables collection, or rely on external support.
The rating house had recently downgraded Oilcorp’s RM70mil Murabahah underwritten notes issuance facility/Islamic medium-term notes facility (Munif/IMTN) to MARC-4ID/BBID from MARC-2ID/A-ID.
Oilcorp failed to deposit the balance of RM10mil into the designated accounts for the Munif/IMTN facility due on Sept 7, before the RM20mil redemption on Oct 7.
“MARC has been informed that the sole bondholders of the Munif/IMTN have granted indulgence of up to three months to Jan 7, 2010 in order to meet the sinking fund due on Sept 7 and redemption due in October,” the rating house said.
Oilcorp posted a wider net loss of RM1.5mil for the second quarter ended June 30 versus RM1.02mil in the previous corresponding period, as revenue fell 15% year-on-year to RM69.5mil.
Earlier this month, subsidiary Oilfab Sdn Bhd secured a RM36mil job for Brownfield Retrofit Project from Carigali Hess Operating Co Sdn Bhd.
Oilcorp had previously delayed its 2007 audited accounts due to disagreement between the management and the auditors over the value of a contract. – The Star
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