This article first appeared in The Edge Malaysia Weekly on September 4, 2023 - September 10, 2023

THE problems faced by Practice Note 17 (PN17) company Perak Corp Bhd and its wholly-owned PCB Development Sdn Bhd seem to be mounting, and these issues could adversely impact the company’s scheme of arrangement, which was approved by creditors on April 19, 2021.

The latest problem comes in the form of a police report lodged by Paramjit Singh Gurbachan Singh, a director of Paramount Grace Sdn Bhd, on Aug 19 at the Travers Police Station, alleging fraud in relation to Perak Corp’s assets, which the company had claimed to own under its creditors’ scheme of arrangement as announced to Bursa Malaysia in December 2020.

Paramount Grace is one of Perak Corp’s creditors. It was awarded a contract for mechanical and electrical works at Movie Animation Park Studios, operated by Animation Theme Sdn Bhd, in which Perak Corp via PCB Development has a 51% stake.

In mid-December 2020, Paramount Grace was included in the creditors’ scheme of arrangement, after Perak Corp fell into the cash-strapped PN17 category. While Paramount Grace is owed only RM815,697.06, Paramjit’s allegations could have a serious impact on Perak Corp, and its creditors’ scheme of arrangement.

The police report states that on Aug 9, 2023, Perak Corp announced that it had entered into a sale and purchase agreement with Kim Poh Sitt Tat Feedmill Sdn Bhd to dispose of leasehold agricultural land measuring 110 acres in Kampar, Perak, for a consideration of RM5.5 million cash. The property was registered in the name of Perbadanan Kemajuan Negeri Perak (PKNP), which is holding the parcel of land in trust for Perak Corp. PKNP is the controlling shareholder of Perak Corp with 52.9% equity interest.

Paramjit in his police report alleges, “I found out recently that Perak Corp has sold its landed assets in Kampar, which are not listed under its creditors’ scheme … I believe there is a strong possibility that Perak Corp owns more assets than are stated in its creditors’ scheme. Based on the explanation above, I wish to report fraud with intention to deceive by the board of Perak Corp.”

Paramjit has also filed complaints with the Securities Commission Malaysia (SC) and written to Perak Menteri Besar Datuk Saarani Mohamad and DAP secretary-general Anthony Loke Siew Fook.

“The SC confirms that a complaint against Perak Corp has been lodged with the regulator by Paramount Grace. All complaints received by the SC are reviewed and necessary action will be taken for any breach of securities laws,” says the SC.

Checks on the proposed scheme of arrangement between Perak Corp, its unit PCB Development and creditors indicate that this parcel of land is not included in its assets. Questions to Perak Corp on the police report and assets being left out of the proposed creditors’ scheme of arrangement had not been answered at press time.

Perak Corp’s main businesses, which include property development and port management via its 50% plus one share in Lumut Maritime Terminal Sdn Bhd, should keep the company in good stead.

The police report and complaints to the SC come five months after Perak Corp’s former CEO Mohamed Shafeii Abdul Gaffoor sought legal redress to set aside the sanctioned scheme of arrangement of Perak Corp and PCB Development, and filed a suit at the Ipoh High Court on Feb 20 this year.

According to news reports, Mohamed Shafeii disputed Perak Corp’s scheme of arrangement, which claims to have more liabilities than assets. He claims that Perak Corp has assets and liabilities amounting to RM1.33 billion and RM858.37 million respectively. His other grouse is that the scheme of arrangement does not take into account the potential earnings or debt that could be realised or recovered.

Mohamed Shafeii was spurred by a decision made by the Ipoh Magistrate’s Court in September last year that indicated there were elements of crime detected in Perak Corp’s restructuring exercise. He is looking to the courts to appoint a receiver and manager. The court has referred the matter to the police for investigation.

In the suit filed by Mohamed Shafeii, the respondents are Perak Corp, PCB Development, Ferrier Hodgson MH Sdn Bhd (the scheme adviser), and directors and former directors of Perak Corp.

Problems at Perak Corp came to the fore when on Sept 26, 2019, Animation Theme Park defaulted on a RM25.7 million principal repayment of a term loan of RM245.1 million with Affin Hwang Investment Bank Bhd. This triggered a cross default on borrowings totalling RM191.8 million.

As a result, Perak Corp was declared a PN17 company in February 2020.

On Nov 8, 2021, it entered into debt settlement agreements with Affin Hwang Investment Bank and CIMB Bank Bhd, another major creditor, involving a cash settlement and issuance of up to 35.82 million redeemable preference shares (RPS) at an issue price of RM1 each.

Under the restructuring exercise, Perak Corp owed non-financial institutions (non-FIs) RM140.12 million while PCB Development’s Non-FI borrowings totalled RM326.61 million. Non-FI creditors were to be paid six sen to the ringgit owed by Perak Corp and eight sen to the ringgit owed by PCB Development. Both schemes of arrangement were passed in April 19, 2021.

To recap, former Perak Corp director Chong Zhemin, who is member of parliament for Kampar, had lodged a police report at the Dang Wangi Police Station in Kuala Lumpur on June 9 last year. He alleged that Perak Corp in its scheme of arrangement had not listed its actual assets, implying creditors had been short-changed.

The police referred Chong’s complaint to the Ipoh Magistrate’s Court, where Magistrate Noor Hafiza Ishak in September last year held that there were indeed elements of crime detected in Perak Corp’s restructuring exercise and referred the matter back to the police.

Perak Corp announced to Bursa on June 16 last year that its officials had lodged a police report as well “over this malicious allegation and inaccurate statements made by Chong”.

For the six months ended June this year, Perak Corp managed to make a net profit of RM276,000 from RM79.82 million in revenue.

As at end-June, the company had deposits, cash and bank balances of RM58.05 million as well as short- and long-term debt commitments of RM93.27 million and RM34.19 million respectively. It had generated a net operating cash flow of RM12.18 million.

Perak Corp’s share price closed at 30 sen last Thursday, giving the company a market capitalisation of RM30 million. 

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