YONGNAM Engineering & Construction, a wholly-owned subsidiary of steel fabricator Yongnam Holdings, has received a letter of demand from Arcent for overdue payments.

 

The letter of demand, dated Sep 6, is for a sum of S$36,969.68 for services rendered by Arcent &ndash a supplier of cutting and welding equipment &ndash and its supply of parts to the machinery of Yongnam Engineering & Construction.

 

According to the letter of demand, Arcent has allegedly been trying to recover the overdue payments since Jan 27, 2023, &ldquo but has not been successful in doing so,&rdquo said the judicial managers of Yongnam Holdings in a bourse filing on Monday (Sep 18).

 

The letter of demand wants overdue payments to be made by Oct 5.

 

At least two other letters of demand were issued to Yongnam Engineering & Construction earlier this year.

 

On Sep 5, the unit received a letter of demand from the attorney of Malayan Banking Berhad in relation to outstanding payments of RM15.9 million (S$4.6 million) due under three loan facilities.

 

Then on Sep 11, it received another letter of demand from Mitsui Bussan Pana Harrison &ndash issued by the solicitors of Ergo Insurance &ndash in relation to outstanding payments due under a workman&rsquo s compensation policy.

 

Trading of Yongnam Holdings&rsquo shares has been suspended since Nov 24, 2022

 

MAINBOARD-LISTED steel fabricator Yongnam Holdings on Wednesday (Dec 28) received a letter of demand over RM8.5 million (S$2.6 million) in arrears owed to the trustee of Bursa-listed Axis Reit.

 

In a bourse filing on Thursday, the company said the arrears are rental, compensation charges and legal fees due for Axis Steel Centre @ SiLC in Johor, Malaysia.

 

Its subsidiary, Yongnam Engineering, occupies the space.

 

It is stated in the letter of demand that Yongnam Holdings had unconditionally guaranteed Yongnam Engineering&rsquo s payments, and would have to discharge all obligations, responsibilities, liabilities and covenants under the lease of the premises.

 

The letter of demand asked that Yongnam pay the outstanding sum within seven days, by Jan 4, 2023.

 

If the company fails to pay up, Axis&rsquo trustee shall institute legal proceedings for the recovery of the sum, together with all costs and interest incurred thereto.

 

Yongnam Holdings said it intends to continue discussions with Axis&rsquo trustee and seek its continued support for the revision of repayment terms.

 

WITH S$90.7 million in borrowings due within the next year, Yongnam Holdings has commenced negotiations with a potential financier and a potential investor to keep the company afloat, said its chief executive Seow Soon Yong.

 

On Wednesday (Nov 23), Seow said Yongnam has been exploring these options to &ldquo ensure that the company (has) sufficient funds to service its borrowings and is able to continue as a going concern&rdquo . He added that the talks and their underlying transactions are mutually exclusive, and Yongnam intends to only secure either refinancing for its borrowings or an investor.

 

The mainboard-listed steel fabricator on Nov 11 reported a net loss of S$18.2 million for its third quarter ended Sep 30, up 73 per cent year on year. It also reported that its current borrowings had more than doubled to S$90.7 million from S$37.2 million previously.

 

Current borrowings refer to debts due within the next 12 months.

 

Responding to queries from the Singapore Exchange, Seow attributed the increase to term loans of S$61.2 million due within the coming year. He said refinancing would help Yongnam service these borrowings and keep it viable. On the other hand, securing an investor could involve negotiations with lenders and creditors on loan and debt terms, to ensure the company can meet its payment obligations.

 

Yongnam earlier said in its financial statement for the period ended Sep 30 that it would consider monetising its steel beams and columns if faced with short-term cash flow gaps. The company noted that doing so could affect its business if it is awarded any new projects involving these assets.

 

After posting its Wednesday letter to shareholders, Yongnam requested for a voluntary suspension of trading of its shares on Thursday morning. The company explained that this was to avoid irregular share price movements, and to &ldquo avoid market confusion&rdquo as it proceeds with negotiations.