From Judicial Management To Reverse Takeover &ndash Hatten Land FY2025

 

Hatten Land, which is under judicial management, is proposing to acquire a construction business in a reverse-takeover deal worth $24 million.

 

The developer, known for its Malacca developments, plans to pay for the acquisition of Metrocon by paying its owner, LBD Engineering, some 5.57 billion new shares.

 

If this deal goes ahead, LBD Engineering, a building contractor, will end up owning around 60% of Hatten Land.

 

The target business, Metrocon, is in general building construction, including piling and major upgrading works.

 

It has a paid-up capital of $18 million and as at Sept 30, an unaudited book value and net tangible asset value of $7.38 million each.

 

In the most recent 9MFY2025, Metrocon generated earnings of $1.98 million and revenue of $41.3 million.

 

Hatten Land has appointed Navi Corporate Advisory to do an independent valuation and the final consideration might be subject to further adjustments.

 

Hatten Land shares have been suspended from trading since last August and in the same month, put under the judicial management of Deloitte Singapore SR& T Restructuring Services.

 

" The judicial managers are of the view that the proposed acquisition will enable the company to venture into a business area that has potential for growth, and the opportunity to engage with its creditors to restructure and reorganise its financial position," reads Hatten Land' s Nov 21 SGX filing.

 

Separately but in conjunction, following a creditors' meeting on Oct 31, the judicial managers were given the go-ahead to place a Hatten Land subsidiary, Hatten MS, into liquidation.

 

Metrocon is principally engaged in the business of general building construction, including piling and major upgrading works.

 

The Judicial Managers have been focusing their efforts on stabilising the Group&rsquo s financial position, while exploring strategic business and investment opportunities with a view to restructuring the financial condition of the Group and a resumption of trading of the Shares.

 

The Judicial Managers are of the view that the Proposed Acquisition enables the Company to venture into a business area that has potential for growth, and the opportunity to engage with its creditors to restructure and reorganise its financial position.

MDSA Resources, an indirect wholly owned subsidiary of Hatten Land : PH0 0%, has received a notice of default and a letter of demand from Kenanga Investment Bank for a total of RM14,114,652.15 (S$4 million), it said on Thursday (Mar 28).

 

The sum owed was in relation to Hatten Land&rsquo s medium-term note (MTN) programme.

 

Hatten Land has engaged Deloitte & Touche Financial Advisory Services to develop a restructuring plan and explore fundraising strategies amid its financial challenges.

 

The notice of default from the trustee representing Kenanga Investment Bank &ndash the principal adviser, lead arranger, lead manager and facility agent of the MTN programme &ndash was in relation to the RM12,350,000 Notes issued by MDSA Resources under the programme.

 

The sum of RM12,350,000 and RM492,646.58, being the outstanding principal sum and coupon of the programme respectively, should be paid to the trustee no later than Apr 5, 2024, said the notice, dated Mar 25, 2024.

 

MDSA Resources also received a letter of demand dated Mar 25 from the solicitor representing Kenanga in relation to the MTN programme, for the outstanding amount of RM1,272,005.57 as at Mar 20.

 

This sum, together with late payment interest accrued at 10 per cent per annum from Mar 21, 2024, till the date of full settlement, should be paid to Kenanga no later than seven days from the date of the letter, the letter said. 

 

The notice and letter are the latest in a series of financial troubles for the real estate developer. The company, or its subsidiaries, have also received notices or letters from Haitong International Financial Products (Singapore), Bank Kerjasama Rakyat Malaysia, certain bondholders and HSBC Bank.

 

Haitong International asked for US$21.5 million, Bank Kerjasama Rakyat Malaysia demanded RM60 million, bondholders sought US$23 million, and HSBC Bank is looking for RM6 million.

 

Hatten Land &ldquo remains committed in engaging proactively with Kenanga&rdquo with its financial adviser&rsquo s assistance to resolve the matter, it said.

 

The company&rsquo s controlling shareholders have entered into a term sheet with a reputable financial institution in Singapore in their personal capacity for fundraising facilities, which will be secured with their personal assets, Hatten Land added. This is meant to provide a shareholders&rsquo loan to the company for it to repay its secured bonds.

 

It is currently at the legal documentation stage.

 

&ldquo Barring any unforeseen circumstances, the group expects to drawdown the fundraising facilities in FY2024.&rdquo  

 

On whether it has resolved issues relating to previous letters of demand, Hatten Land said it continues to engage its lenders.

 

The weaker showing in Q2 was chiefly due to a 21.3% decline in revenue to RM3.8 million from RM4.9 million. 

SINGAPORE - Real estate developer Hatten Land on Feb 12 reported a net loss of RM20.7 million (S$5.8 million) for its second fiscal quarter ended December 2023, significantly deeper than the loss of RM4.3 million it recorded in the year-ago period.

 

On a per share basis, this translated to a loss of RM0.0111 compared with RM0.0023 in the comparable year-ago period, the group said in a bourse filing. No dividend was declared for the quarter under review.

 

The weaker bottom line showing in the second quarter was chiefly due to a 21.3 per cent decline in revenue to RM3.8 million from RM4.9 million. Hatten Land said its sales and marketing strategy is continuing in line with the progress of securing anchor tenants for its malls, which would potentially increase the value and attract more attention to its unsold properties.

 

Cost of sales for the quarter fell 43 per cent to RM1.6 million.

 

For the six-month period ended December 2023, Hatten Land&rsquo s net loss swelled to RM31.7 million from RM21 million. Revenue for the half-year period was down 6.4 per cent to RM14.2 million.

 

Hatten Land said that as at end-December 2023, its total loans and borrowings amounted to RM393.8 million &ndash of which RM391.8 million were classified as current liabilities and exceeded the group&rsquo s cash and bank balances of RM3 million.

 

The company&rsquo s liabilities of about RM1.1 billion also exceeded its current assets that totalled just RM876.8 million.

 

However, the company said it was still presenting a net asset position of RM43.7 million as at end-December last year.

 

Hatten Land said its directors believe the group can continue operating on a going-concern basis as the Malaysian property market is showing signs of gradual improvement and there is optimism for the recovery of its hospitality and property-related activities in Melaka. The company said it holds a &ldquo steadfast focus&rdquo on its core property development business.

 

Hatten Land said the total market value of its development properties crossed RM1.1 billion as at end-June 2023, of which RM663 million constitutes unsold completed properties that it intends to sell gradually.

 

The company said it continues to work with its creditors to extend or restructure payment plans that include payment structure as well as contra payments with its property units. It is also working with its banks for the roll-over and extension of the repayment obligations, which aligns with the company&rsquo s requirements for the current business climate, and channels its cash flow for operational purposes.

 

Hatten Land has also begun the strategic restructuring of its subsidiary GMSB, in a bid to rejig its legacy contractual obligation to achieve a more sustainable capital structure. This will in turn reduce the pressure on the company&rsquo s cash outflows in the future.

 

One of the executive directors, who is also a controlling shareholder of Hatten Land, has undertaken to provide necessary financial support in the form of debt, equity, or a combination of both, in the event that is required by the group to sustain its operations.

 

In its outlook statement, Hatten Land said Melaka&rsquo s slower pace of recovery &ndash when compared to major urban cities such as Kuala Lumpur and Johor Bahru &ndash is further compounded by the growing competition in the region.

 

A majority of the group&rsquo s unsold completed properties are commercial spaces that have been non-operational since the pandemic and the introduction of government control measures. In response, Hatten Land is focusing on &ldquo transforming these spaces into versatile and attractive areas&rdquo . It has established partnerships in various sectors and is consistently pursuing fundraising activities.

 

Hatten Land has received a notice of default dated Jan 30 from Haitong International Financial Products (Singapore), over a US$20 million convertible loan.

 

The loan, extended back in May 21 2020, was to help finance the Hatten City Project, among others.

 

The loan is secured by a corporate guarantee from a Hatten Land PH0 0.00% subsidiary in Malaysia, a charge of over 760 million Hatten Land shares, 345 retail units within the project, plus personal guarantees by " certain directors" of Hatten Land. They were not named.

 

This update via the stock exchange was issued in the name of Colin Tan, Hatten Land' s executive chairman and managing director (picture)

 

According to Hatten Land, Haiton is asking for US$21.5 million (including interests) to be paid within five business days of Jan 30. 

 

Hatten Land, after a follow-up with Haitong, says the latter is " prepared to agree to withhold taking recovery actions" up until March 31.

 

In the meantime, the parties are negotiating a settlement agreement.