KUALA LUMPUR (Sept 25): Practice Note 17 (PN17) company Ivory Properties Group Bhd (KL:IVORY) announced on Wednesday that its wholly-owned subsidiary, Ivory Gleneary Sdn Bhd (IGSB), has appointed interim liquidators to initiate the winding-up of the company as part of its regularisation plan.

The decision came after IGSB, which Ivory Properties said is not a major subsidiary, could not get its scheme creditors to agree to a proposed scheme of arrangement that was presented at a court-convened meeting on Sept 20.

As of June 30, IGSB had net current liabilities of RM58.6 million, rendering it both "cash flow and balance sheet" insolvent and unable to meet its financial obligations, according to Ivory Properties in a filing with Bursa Malaysia.

"As a result, the appointment of interim liquidators is part of our proposed regularisation plan to reduce losses by dissolving and liquidating financially distressed, liability-laden and insolvent subsidiaries," said Ivory Properties.

IGSB's troubles began when it was sued by Bank Islam Malaysia Bhd last year over an outstanding payment of RM19.8 million. IGSB also incurred liquidated ascertained damages (LAD) totalling RM73.6 million, owed to the purchasers of Phase 3 of Penang Times Square - The Wave and Commercial, as of the cut-off date on March 31, 2024.

These liabilities resulted in IGSB slipping into a negative equity position, leading to IGSB applying for the court-convened meeting, as provided for under the Companies Act 2016.

As at end-June 2024, IGSB recorded accumulated losses of RM74.5 million, with an additional RM500,000 loss incurred in the April to June period. IGSB is unlikely to continue operations without a comprehensive restructuring, Ivory Properties noted.

Ivory Properties said it had already written off its investment in IGSB as impairment losses totalling RM30.1 million — comprising RM28.2 million investment cost and RM1.9 million in advances — in its FY2024 audited financial statements.

Ivory Properties also said that the appointment of the interim liquidators — Andrew Heng and Ashvin Mahendran — as well as the subsequent winding-up process will not have a material impact on its earnings, gearing, issued share capital, or substantial shareholders' shareholdings.

"The appointment of interim liquidators is not expected to affect our business operations," the group said, adding that the creditors' voluntary winding-up will allow an independent professional to handle IGSB’s outstanding matters in the best interests of all creditors.

Ivory Properties slipped into PN17 status in August 2022 after its external auditors, Messrs KPMG PLT, issued a disclaimer of opinion on the company’s audited financial statements for the financial year ended March 31, 2022 (FY2022) as it flagged uncertainties about Ivory Properties' ability to continue as a going concern.

As of end June this year, the group’s cash and bank balances stood at RM1.55 million, while its short-term borrowings totalled RM80.54 million.

Shares in Ivory Properties closed half a sen or 8.33% lower to 5.5 sen on Wednesday, giving the company a market capitalisation of RM26.95 million.