KUALA LUMPUR (Sept 9): Ho Hup Construction Company Bhd (KL:HOHUP) and its 75%-owned subsidiary Ho Hup Ventures (KK) Sdn Bhd (HHVKK) have been served a writ of summons and statement of claim by state-owned Sabah Development Bank Bhd (SDB).
In a bourse filing on Monday, Ho Hup revealed that it has been served with the suit dated May 15, 2024 on Aug 12, 2024 in its capacity as corporate guarantors for Golden Wave Sdn Bhd, in respect of a loan facility granted to Golden Wave from SDB.
Meanwhile, HHVKK is sued by SDB in its capacity as a shareholder of Golden Wave, which in turn is an indirect subsidiary of Ho Hup, with the group holding an effective 52.5% stake through its ownerships in HHVKK.
SDB’s suit against Ho Hup and HHVKK comes following the judicial management application filed by Golden Wave on May 17, 2024, which was two days after the suit was filed, at the Kuala Lumpur High Court.
The judicial management triggered a moratorium against all claims and suits against Golden Wave. Due to the judicial management, SDB withdrew its suit against Golden Wave on July 30, 2024 but retained its suits against Ho Hup and HHVKK.
Judicial management is a corporate rescue mechanism allowing companies to appoint a judicial manager when they cannot meet their debt obligations.
SDB is now suing Ho Hup and HHVKK for RM46.85 million (as of May 2, 2024), plus 5% annual interest from Nov 1, 2023, until judgement, and additional interest until full payment.
SDB is also seeking legal costs, filing fees, and other proceeding expenses.
Golden Wave is a developer of The Crown — a mixed development in Kota Kinabalu with a gross development value of RM900 million.
The development is Ho Hup’s maiden foray into the Sabah market.
Ho Hup acquired 70% stake in Golden Wave via HHVKK in 2015 from Agro Padi Sdn Bhd for RM30 million, which enabled the group to gain ownership of a five-acre commercial leasehold land in Kota Kinabalu.
On June 12, 2018, the company entered into a facility agreement with SDB. It is believed that the facility is to be used for the development of The Crown mixed project, which was launched in September 2019.
Eko Bina Sdn Bhd, a subsidiary of Ecobuilt Holdings Bhd (KL:ECOHLDS), was awarded a RM166.37 million contract in January 2021 for construction works for the main buildings, external works for retail and serviced apartments.
It is not known whether Golden Wave had breached its facility agreement with SDB. However, in August 2023, Eko Bina had issued a notice of adjudication to Golden Wave over a payment dispute relating to a serviced apartment and retail units project in Kota Kinabalu.
Eko Bina sought RM23.16 million from Golden Wave with regards to payments due during the construction process and won the case.
On the suit by SDB, Ho Hup is consulting legal advisers to contest it and is negotiating with SDB to resolve the issue.
The company noted that it is too early to assess the financial and operational impact, which will depend on the suit's outcome.
Loss-making Ho Hup has been in the red for over two fiscal years. Its net loss swelled to RM19.7 million in the second quarter ended June 30, 2024 (2QFY2024), compared to RM1.39 million a year ago, due to restructuring exercises and decreased sales in the property development and construction divisions. Revenue fell 68.1% year-on-year to RM21.74 million from RM68.13 million.
As of June, the company had cash and bank balances of RM17.2 million and total borrowings of RM491.8 million.
Two winding-up petitions
In a separate filing, Ho Hup said that its wholly owned subsidiary Bukit Jalil Development Sdn Bhd (BJD) has been served with two winding-up petitions over a total outstanding payment of RM7.8 million.
The petitions were filed by Sunrise Model Sdn Bhd on July 17 and NRY Architects Sdn Bhd on Aug 19.
Sunrise Model claims that it expressed interest in purchasing part of a mixed development project in Bukit Jalil for RM97.65 million via a letter of offer dated Nov 10, 2021, and paid RM1.95 million as a deposit.
Since the deal was never finalised and no sale agreement was signed, Sunrise is now seeking the return of the deposit.
Sunrise Model requests the court to wind up BJD under Section 465(1)(e) of the Companies Act 2016, appoint an official receiver as liquidator, have the costs paid from BJD's assets, and issue any other appropriate orders.
Nevertheless, Ho Hup contends that the letter of offer does not include terms for termination or refunds and views the claim as an attempt to exert undue pressure.
Meanwhile, NRY Architects is claiming RM5.84 million in outstanding consultancy fees through several proforma invoices for the mixed development project. BJD disputes and denies both the claim and the alleged work done by NRY Architects.
NRY Architects has requested that BJD be wound up under Sections 465(1)(e), 466(1) and (2) of the Companies Act 2016, with costs covered by BJD's assets and liquidator remuneration approved on a time-cost basis, along with other appropriate orders.
Ho Hup said that BJD is not a major subsidiary of the company and it does not anticipate any significant financial or operational impact from the petitions.
Ho Hup is seeking legal advice to oppose both petitions and will request the court to strike them out.
Additionally, Ho Hup stressed that BJD has entered into a conditional sales and purchase agreement to sell the mixed development project to EXSIM Persiaran Jalil Sdn Bhd, with the sale pending completion.
EXSIM Persiaran Jalil is a wholly owned unit of property developer Exsim Development Sdn Bhd.
Shares in Ho Hup closed one sen, or 6.25%, lower at 15 sen on Monday, giving the company a market capitalisation of RM77.74 million.