Syndicated lenders granted order to sell Zecon collateral

KUCHING: The syndicated lenders have been granted an order by the High Court here to sell the land charged as collateral by a Zecon Bhd subsidiary for obtaining financing facilities for the construction of the Petra Jaya Hospital project.

Zecon was terminated as the project’s turnkey contractor by the Public Works Department (JKR) in August 2018 after it failed to complete the 300-bed hospital on schedule. 

Zecon, according to the Health Ministry, managed to achieve only about 35 percent completion rate by June 2018 although it was required to complete it in November 2016.

As a result of the termination, the syndicated lenders notified Zecon on Sept 7, 2018 that an event of default for payment of principal and interest of the financing facilities to the tune of some RM104.36 million has occurred.

Subsequently on Sept 26, 2018 subsidiary Zecon Capital Ventures Sdn Bhd (ZCVSB), as a third party security party to the financing arrangement, was served a notice by the syndicated lenders stating that they would institute foreclosure proceedings of the land belonging to it (ZCVSB) should it fail to pay up the outstanding sum within
30 days.

As ZCVSB failed to settle the sum, it was served a writ of summons filed by the syndicated lenders at the High Court
on Oct 29.

Zecon had then claimed that it had defaulted in paying the syndicated lenders because a substantial sum of the company’s money was stuck in the hospital project in terms of equipment supplied and delivered on site and work done but not paid although certified.

According to Zecon, some RM55 million had been certified by the consultants and due for payment by JKR.

In its latest monthly update on the default in payment to Bursa Malaysia, Zecon said the court had on Sept 11 granted the plaintiff (syndicated lenders) an order for sale of the charged land.

This came after the plaintiff filed an application in court for summary judgement and an application to strike out ZCVSB’s counterclaim. The court also refused leave to ZCVSB to intervene in the suit.

In response to the latest court order, ZCVSB (now known to Huang Hong Sdn Bhd) filed a notice of appeal to the Court of Appeal on Sept 13.

Then on Sept 27, Huang Hong received a copy of the grounds of judgement from the Judicial Commissioner, and instructed its solicitors to prepare and file at the Registrar, the memorandum of appeal and other required documents within 90 days as required.

“As regards to the writ of summons, the plaintiff had on August 19 2019 via their solicitors filed at the High Court an application for summary judgement and an application to strike out the company’s counterclaim.

“On September 10 2019, the company had through its solicitors obtained an extension of time to file the affidavit in opposition by September 17 2019, “ said Zecon, adding that the affidavit was filed on that day.

Until now, Zecon said there has been no further development on the case.

On the arbitration of the disputes between Zecon and JKR/federal government, Zecon has said recently that the Asian International Arbitration Centre had appointed a new arbitrator Chu Ai Li on June 12.

Zecon had on August 21, 2018 served on JKR/federal government the notice of arbitration, claiming an amount of RM155.99 million. The company has argued that the termination of the hospital project was wrong.

The construction company, which is laden with debts, has recently raised about RM3.28 million from a private placement to meet its short-term financial needs.

Based on the audited account as at June 30, 2018, Zecon group’s liabilities stood at about RM715.7 million against assets of RM228.6 million.