KUALA LUMPUR: Bintai Kinden Corp Bhd believes that it has solid grounds to claim at least RM393 million from Kolej Teknologi Islam Melaka Bhd (KTIMB) with regards to its default on the University Islam Melaka (Unimel) hostel project.
Managing director and chief executive officer Datuk Tay Chor Han said despite the potential termination of the concession as per clause 11 of the concession agreement (CA), the company remains optimistic about the project and desires a swift and amicable resolution with KTIMB and the Melaka state government.
"We believe in the possibilities of a win-win positive outcome for all stakeholders of the project. Come what the future may hold, it's essential to acknowledge the potential course of action outlined in Clause 11 of the CA.
"If challenges persist, Optimal Property Management Sdn Bhd (OPM) may find itself compelled to terminate the CA as an option as allowed under the CA contractual provisions.
"Without going into the details of the CA, Bintai Kinden believes it has solid grounds to invoke its rights under the CA which allows for a claim of at least RM393 million from KTIMB," Tay said.
On Dec 3, 2015, the Melaka government via its fully owned entity, KTIMB, awarded a 25 year CA to design, construct, operate and maintain the hostel project.
The project was funded by OPM, which is a subsidiary of Bintai Kinden, via its own resources as well as a RM109 million loan from MBSB Bank Bhd. The loan was secured by a Bintai Kinden corporate guarantee.
As part of the project financing covenants, the Chief Minister Incorporated Melaka (CMI) agreed to top up in the event of any shortfall in the quarterly and annual availability charge rate (ACR).
However, KTIMB defaulted on its obligations as per the CA due to delayed payments of the ACR.
The ACR outstanding as at December 2023 amounted to RM58.6 million and continued to grow as OPM did not receive any payments from KTIMB since early 2023.
The lack of payment from KTIMB and ongoing loan repayments towards the bank loan has put Bintai Kinden under tremendous financial strain. The company was then classified as a Practice Note 17 (PN17) company.
"The PN17 classification had profoundly impacted Bintai Kinden, leading to the suspension and/or termination of the group's banking facilities as well as termination of several key customer contracts which ran in excess of RM207 million.
"The group has downsized its scale of operations, headcounts as well as undertook significant cost reduction initiatives such as pay cuts and office rental reduction in its efforts to keep its fixed cost low.
"The irresponsible default by KTIMB and the lack of commitment from the Melaka state government has not only affected Bintai Kinden as a company but has impacted the career of its employees and their families, the vendors of the company as well as 12,600 shareholders," he added.
He noted that the reduction in staff strengths and the implementation of pay cuts at the company have presented challenges.
However, the current team is committed and remains optimistic of the group's future.
"We will spare no efforts to exit PN17 in the near future so that we can grow sustainably. As and when our financial resources improve in the future, we do not rule out being a consistent dividend-paying listed company as a way to thank our loyal shareholders," added Tay.
A new management team was assembled to address the inherited challenges faced by the company.
The team had resolved and entered into amicable settlement arrangements with all its financiers, business partners and creditors.
In December 2023, the company secured an agreement to settle RM3 million of debt with MBSB Bank whereby the bank will drop the legal suit over the default.
"Going forward, there are no more material legal suits against Bintai Kinden's group of companies. We are also actively optimising operations and building our orderbook while addressing inherited legacy issues," he said.
To address the company's financial situation, Tay said his team has overhauled the business model by laying a solid foundation and bringing focus at the execution level to build a sustainable future.
"We instituted several legal suits to recoup legacy debts, resolved long outstanding disputes amicably with our customers and business partners and now are strengthening our balance sheet by offering a 30 per cent private placement," he said noting that the initiative which was approved by Bursa Malaysia on Dec 18 was crucial for its financial recovery.
The proceeds from the placement were earmarked towards repayment of existing bank borrowings as well as working capital needs.
He added that it was also critical for the company to ensure transparency and open communication with its stakeholders during this challenging period.
Tay said the new management team has demonstrated its sincerity in resolving issues amicably with the pure intention of genuinely doing business.
"We believe, since the new management took office, parties who had engaged with us would have gained confidence in the group.
"Ideas and plans moving forward were disclosed and even at times debated in a collaborative manner. Given the openness and sincerity of the new management, financiers and stakeholders can and will continue to see that we are not about "empty promises and grandeur visions" but we intend and will walk the talk and deliver on our commitments," he said.
