This article first appeared in The Edge Financial Daily on January 16, 2020 - January 22, 2020

PETALING JAYA: Businessman Tan Sri Wan Azmi Wan Hamzah and Datuk Mohd Zakhir Siddiqy Sidek might unintentionally become substantial shareholders of Scomi Energy Services Bhd, no thanks to Scomi Group Bhd’s tight cash flow.

Scomi Group has failed to repay the loans that the duo extended to the company six months ago, according to sources. Each of them extended a RM21 million loan in July last year. These loans are securitised against 435.23 million shares in Scomi Energy that Scomi Group owns.

Scomi Group owns a total of 1.537 billion shares or a 65.64% stake in Scomi Energy.

The pledged shares valued Scomi Energy at 9.65 sen per share. The counter closed at eight sen yesterday.

“Wan Azmi and [Mohd] Zakhir might end up holding the second largest block in Scomi Energy, if Scomi  [Group do] not manage to repay them for the loans by coming Friday (tomorrow),” said a source familiar with the matter. “It will be interesting to see both of them emerging as substantial shareholders in Scomi Energy,” said the source.

Wan Azmi and Mohd Zakhir could be considering allowing for an extension of time for Scomi Group to repay the loans, according to another source. “However, we do not see any way for Scomi [Group] to repay the loans,” the source added.

This raises the question whether the duo would look for investors to buy out their stakes or to hold onto the shares awaiting Scomi Group to complete its recapitalisation exercise that involves rights issue.

Wan Azmi was one of the three shareholders of Syarikat Pengeluar Air Sungai Selangor Sdn Bhd that was sold to Pengurusan Air Selangor Sdn Bhd for RM2.55 billion cash. He is also a substantial shareholder of Eastern & Oriental Bhd, and the single largest shareholder of Rohas Tecnic Bhd.

Meanwhile, Mohd Zakhir is well known as the former managing director of Renong Group. He is currently an independent, non-executive chairman of HSS Engineers Bhd.

It is understood that under the loan agreement, Scomi Group is required to make the bullet payment of RM21 million to Wan Azmi and Mohd Zakhir by tomorrow. The repayment is due six months from the date of full drawdown of the loan.

“If the payments were not made, Wan Azmi and [Mohd] Zakhir will have the option to deal with the pledged shares in Scomi Energy,” said one of the sources. “But the issue here is Wan Azmi and Mohd Zakhir both are not interested in Scomi Energy,” the source added.

In July last year, Scomi Group announced that it had entered into loan agreements with both Wan Azmi and Mohd Zakhir’s Gelombang Global Sdn Bhd for an RM21 million loan to be extended by each of them.

The loan agreement is part of Scomi Group’s multiple proposals to reduce its liabilities and improve its capital base, including the reduction of its issued share capital from RM224.96 million to RM3 million and consolidation of every four shares to one.

The plan also includes renounceable rights issues to raise RM54.6 million to be undertaken by Scomi Group’s largest shareholder IJM Corp Bhd, as well as new shareholders Sharp Ascend Ltd and Sammy Tse Kwok Fai, and settlement of liabilities with Malayan Banking Bhd.

Note that Tse has been Scomi Group’s chief executive officer since Aug 2, 2018, replacing Shah Hakim Zain.

Bursa Malaysia has granted its approval on the multiple proposals involving issue of shares and warrants on Dec 3 last year.