KUCHING: Zecon Bhd has requested its financiers to extend the standstill agreement between them for another six months.
The one-year standstill agreement signed between Affin Hwang Investment Bank Bhd, Bank Pembangunan Malaysia Bhd and Affin Bank Bhd (financiers) with Zecon and Huang Hong Sdn Bhd on Sept 24, 2021 expired on Sept 23, 2022.
Prior to the expiry of the standstill agreement, Zecon said it had on August 22, 2022 written to Affin Hwang Investment Bank, in its capacity as facility agent, requesting for time extension of the agreement for another six months.
The reason for the requested time extension is due to a foreseeable delay in the company’s issuance of Sukuk Wakalah, the proceeds of which were to settle the outstanding amount under the syndicated facilities granted by the financiers.
In its reply letter dated Sept 22, 2022 addressed to both Zecon and Huang Hong, the facility agent informed that the financiers are currently considering Zecon’s request on a without prejudice basis.
“In the interim and pending the decision of the financiers, the status quo is to be maintained by all parties in that there shall be no filing or commencement of any new legal action or proceedings and insofar as the existing legal actions and proceedings are concerned, the status quo should also be maintained,” Zecon said in a filing with Bursa Malaysia.
To recap, the financiers/syndicated lenders filed a writ of summon against Zecon for default of payment arising from the termination of the Petra Jaya Hospital project by the Public Works Department (JKR) on August 2, 2018. Zecon was sacked on the reported grounds that it failed to deliver the project despite being given extension period to complete it.
Zecon was appointed as the turnkey contractor for the 300-bed hospital project in April 2013 for a contract value of RM495 million. The project duration is 42 months, and the project should have been completed by 2017.
Zecon, which claimed that it was wrongly terminated, then initiated an arbitration proceeding against JKR, with a counterclaim amounting to RM207.2 million, of which RM74 million are unpaid claims on certified work done and variation works.
As the court judgement was against Zecon, Zecon filed a notice of appeal on August 11, 2020 against the summary judgement and strike out of Zecon’s counterclaim granted to the syndicated lenders by the court. Following the signing of the standstill agreement on Sept 24, 2021 to withhold all legal proceedings against each other for a period of one year, the Court of Appeal set April 5, 2022 to monitor the settlement progress.
On April 5, the parties updated the court that the settlement process is still on going and the Court of Appeal fixed further case management on Sept 29, 2022.
Zecon had earlier planned to raise up to RM865 million from a proposed medium term Islamic bond. If implemented, the company will use part of the proceeds to pay off existing loans to the banks.
In the case of the foreclosure suit filed by Affin Hwang Investment Bank Bhd against Huang Hong (51 per cent subsidiary of Zecon), the court granted Affin the order of sale of the charged land in June 2020. However, on August 26, 2021, Zecon said at Huang Hong’s appeal, the Appeal Court judges unanimously set aside the order of sale and Affin’s High Court suit was disposed of in Huang Hong’s favour.
Affin’s appeal at the Federal Court was put on hold by virtue of the standstill agreement until Sept 23.