This article first appeared in The Edge Malaysia Weekly on June 17, 2024 - June 23, 2024

STATE-controlled Perak Corp Bhd (KL:PRKCORP) seems to have lost significant parcels of land as a result of not paying nominal amounts in quit rent, documents viewed by The Edge indicate.

In October 2022, the Perak state government initiated moves to take over six parcels of land controlled by Perak Corp’s wholly-owned unit PCB Development Sdn Bhd, as quit rent amounting to RM337,177.48 was owed to the state.

Documents from Pejabat Tanah dan Galian Negeri Perak show that a Land Confiscation Notice (Notis Perampasan Tanah) or Notice 8A had been gazetted for all the six parcels in October 2022.

Why PCB Development failed to pay the quit rent is anyone’s guess, but the losers in this saga seem to be the minority shareholders of Perak Corp and its creditors. It is noteworthy that Perak Corp is 52.9%-controlled by Perbadanan Kemajuan Negeri Perak, the state development corporation. The only other substantial shareholder of Perak Corp is Sime Darby Property Bhd, which has 6.13% equity interest.

A question to cash-strapped Practice Note 17 (PN17) Perak Corp via its website last Friday did not garner any response. The six parcels of land in the Hulu Kinta district measure 38.62 acres in total, and could be worth in excess of RM70 million based on the estimated market value of between RM35 and RM75 per sq ft.

These assets are not found in Perak Corp’s recent annual reports but the documents sighted by The Edge listed the owner as PCB Development.

Former CEO of Perak Corp, Mohamed Shafeii Abdul Gaffoor, tells The Edge, “I have alerted one of the creditors and a regulator”, without elaborating.

To put things in perspective, Mohamed Shafeii was the CEO of Perak Corp from August 2018 to June 2020, and he has sought legal redress to set aside the sanctioned scheme of arrangement of Perak Corp and PCB Development and filed his suit at the Ipoh High Court in February 2023.

While Perak Corp’s scheme was approved by creditors, PCB Development’s was rejected, leading to liquidators being appointed over the latter.

In a nutshell, Mohamed Shafeii is disputing Perak Corp’s scheme of arrangement, which claims the group has more liabilities than assets. He is also at loggerheads with Perak Crop and says the scheme of arrangement does not take into account the potential earnings or debts that can be realised or recovered.

Mohamed Shafeii’s action was spurred by an Ipoh Magistrate’s Court decision in September 2022 that there were elements of crime detected in Perak Corp’s restructuring exercise.

He also questioned why in mid-2021, PCB Development’s funds derived from hiving off four pieces of vacant commercial land and one piece of vacant residential land in Hulu Kinta to the Social Security Organisation (Socso) for RM78.68 million were diverted to Perak Corp in January 2022 — to pay Affin Islamic Bank RM53.87 million (RM38.95 million in cash and RM14.92 million via preference shares) and CIMB Bank RM34.72 million (RM13.82 million cash and RM20.9 million via the issuance of preference shares) — when PCB Development had its own set of creditors.

Adding to the intrigue, in Perak Corp’s annual report for FY2023, it is stated, “On March 29, 2024, the company entered into a share sale and purchase agreement in relation to the disposal of 100% shares and interest in PCB Development on a ‘willing buyer, willing seller’ and ‘as is where is’ basis to Rescene Sdn Bhd for a purchase price of RM1.

“The transaction was completed on the same day. The decision to dispose of PCB Development was made after careful consideration and thorough evaluation of PCB Development’s significant negative financial standing, its non-going concern status and the creditors’ voluntary winding up,” Perak Corp says.

PCB Development was at one time a key asset of Perak Corp.

There was no announcement of the sale of PCB Development to Bursa Malaysia, as it was not deemed a material transaction, perhaps considering PCB Development’s debts and lack of assets.

Searches of its filings with Suruhanjaya Syarikat Malaysia (SSM) or the Companies Commission of Malaysia indicate that PCB Development for the financial year ended December 2020 — the last financial result available on SSM — suffered after-tax losses of RM59.86 million on revenue of RM2.94 million.

As at end-December 2020, PCB Development had total assets of RM112.54 million and total liabilities of RM617.24 million. Meanwhile, its accumulated losses amounted to RM562.62 million.

Some of the key assets under PCB Development included a 51% stake in Animation Theme Park Sdn Bhd (ATP), the operator of the Movie Animation Park Studios, which was closed in January 2020 after it received lukewarm response from its opening in mid-2017.

Duar Tuan Kiat from Ernst & Young was appointed receiver and manager of ATP in late 2019.

Issues at Perak Corp came to light in September 2019 when ATP defaulted on principal repayment of RM25.7 million of a term loan of RM245.1 million from Affin Hwang Investment Bank Bhd, which triggered a cross-default on borrowings totalling RM191.8 million.

In November 2021, Perak Corp entered into debt settlement agreements with Affin Investment Bank and another creditor CIMB Bank Bhd, via a cash settlement and the issuance of up to 35.82 million redeemable preference shares (RPS) at an issue price of RM1 per RPS.

Perak Corp under the restructuring scheme owed non-financial institutions RM140.12 million while PCB Development’s non-financial institutions’ borrowings were pegged at RM326.61 million. Non-financial institution creditors were being paid six sen to a ringgit owed by Perak Corp, and eight sen to a ringgit owed by PCB Development.

Under the restructuring scheme, Perak Corp obtained an 88% haircut from non-financial institution creditors, while its wholly-owned unit PCB Development sought an 84.38% haircut from non-financial creditors but failed.

Former Perak Corp director Chong Zhemin, who is the member of parliament for Kampar, had lodged a police report at the Dang Wangi police station in Kuala Lumpur on June 9, 2022, alleging that Perak Corp in its scheme of arrangement had not listed its actual assets, implying creditors have been short-changed.

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

Perak Corp announced to Bursa Malaysia 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”.

Meanwhile, Rescene, according to SSM filings, indicates that it is a consultant for promotions, event management, public relations and communications. Its shareholders are Shamsul Nashriq Norhisham with 44.44%, Badri Azni controlling 33.33% equity interest, Ahmad Fadleee Ahmad Kamel having 11.11% shareholding and Amran Abu Sidek and Azraai Hasry Abdul Hai with 5.56% each.

Rescene’s paid-up capital is RM90,000 and its directors, both appointed in March 2024, are Muhamad Faris Kamarudin and Muhamad Afif Haiqal Mohd Ariffin. The company’s financial performance was not available.

Perak Corp has been in the PN17 category since February 2020. In May this year, the company managed to get an extension of time of three months — until August 2024 — to submit a regularisation plan.

For its first three months of FY2024 ended March, Perak Corp chalked up after-tax profits of RM132,000 from RM38.03 million in revenue.

As at end-March this year, Perak Corp had deposits, bank and cash balances of RM27.95 million, and on the other side of the balance sheet, the company had long- and short-term liabilities of RM68.17 million and RM51.9 million. Meanwhile, it had accumulated losses amounting to RM177.57 million.

At its close of 35 sen last Friday, Perak Corp had a market capitalisation of RM35 million. 

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