Uncertainty - SILK Holdings ...

Its proposed sale of its highway concession to IJM Corp Bhd for rm395 million in cash seems to have hit a snag.

The meeting that was to have been held between SILK and the bondholders was cancelled. The meeting was to seek approval from Sukuk holders on the divestment of the SILK Highway.

Accordingly, CIMB and BIMB had voted against the proposal via proxy forms. Collectively the duo hold about 47% of the suku issued.

CIMB is believed to have rm274 million of the bonds of 36.4% of the total of rm752 million in debt paper.

SILK requires 75% approval from bondholders to pass the resolution to the sale of the highway at an EGM. In fact CIMB alone should be sufficient to stop the proposal.

The bondholders are against the proposed divestment because they are concerned that new owner may unfavorably vary the terms of the debt paper. Furthermore, the timing of the asset sale is just before the bondholders are due to enjoy high coupon rates of 8%.

The bondholders are demanding in excess of rm350 million cash as compensation upon completion of the sale of the highway concession. The compensation is basically for the bondholders taking a risk in lending to SILK when it was financially stressed and in dire need of restructuring its borrowings.

SILK considers the amount demanded as absurd. Should the company bow to pressure and pay the amount, it will only be left with rm45 million from the sale.

As at July 31 2013 SILK had accumulated losses of rm192 million, long term borrowings of rm829 million and current liabilities of rm58 million.