KUALA LUMPUR: Tanco Holdings Bhd was served with a letter of demand amounting to US$98.05 million (RM341.21 million) from liquidators of Lehman Brothers Commercial Corp Asia Ltd (LBCCAL) declaring a default on the facility agreement entered into between Tanco and 17 of its subsidiaries.

“LBCCAL alleges in the letter that the event of default is non-payment of interest for the period Nov 28, 2008 to Dec 27, 2008 and non-payment of an equivalent of 50% in value of the projections for the selldown of assets. LBCCAL also alleges that the event of default occurred on June 1, 2009. As a result thereof, LBCCAL has demanded the payment of alleged outstanding amounts of US$98.04 million within five days of June 2, 2009,” Tanco announced yesterday.

The company had announced on May 29 that it had filed a suit against LBCCAL and two other parties, in which the company had, among others, taken the position that the facility agreement was illegal, void and unenforceable as being in contravention of the Moneylenders Act 1951.

“The demand has been forwarded to the company’s solicitors for such further necessary action,” Tanco added.

In its May 29 announcement, Tanco said the faculty agreement was signed with LBCCAL on Nov 16, 2007, subsequently amended on Dec 24, 2007, where Tanco and nine of its subsidiaries had individually agreed to accept loan facilities for themselves, comprising one two-year term loan with an aggregate principal amount in US dollars equivalent to RM239.6 million.

It said the amount would also include fees, reserves and expenses as required by LBCCAL, but not exceeding an aggregate sum in US dollars equivalent to RM60.4 million.

“On Sept 15, 2008, the parent company of LBCCAL, Lehman Brothers Holdings Inc filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code. On Sept 18, 2008, provisional liquidators were appointed over LBCCAL,” it said.

Tanco then submitted a proposal to the provisional liquidators of LBCCAL and KPMG Corporate Services Sdn Bhd (KPMG) on Dec 9, 2008, to restructure its loans and repayment schedules.

The terms of the proposal included, among others, a change in denomination into ringgit from US dollars, a revision of interest rates, a waiver of principal and an extended repayment period, it said.

“Following subsequent discussions held between the company, its specialist advisers Sage3 Capital Sdn Bhd, the liquidators and KPMG, a revised proposal was submitted on May 5, 2009 for the liquidators’ consideration,” it said.

This article appeared in The Edge Financial Daily, June 4, 2009.