Construction services and property development company Boldtek Holdings 5VI 0.00% 5VI says it expects to report a net loss and net liability position for the FY2023 ended June 30.

 

Boldtek says the losses were mainly due to its key subsidiary Logistics Construction being in the early stages of restructuring and having been granted a moratorium for a period of three months. 

 

After conducting a review of Logistics Construction&rsquo s financial affairs in respect of restructuring, provisions were made on contract assets which had received final payments, were long outstanding or slow in payments, and for the reversal of contract assets to reflect lower amounts certified. In addition, the subsidiary has also seen fewer ongoing projects. 

 

On Nov 19, Boldtek announced it had filed an application under Section 91 of the Insolvency, Restructuring and Dissolution Act 2018 (IRDA) for Logistics Construction to be placed under judicial management. 

 

That same day, the company announced that it had entered into a non-binding term sheet with Malaysian businessman Ee Chin Keong to divest Logistics Construction.

 

Separately, Boldtek announced the sale of properties in its ordinary course of business on April 21 for which losses are expected to be recognised.

 

Aside from Logistics Construction, which depends on further developments after filing for judicial management and the finalisation of its divestment agreement, Boldtek says it is able to continue operations through its wholly-owned subsidiary Boldtek Projects, which continues to operate and generate cash flows from ongoing operations. 

 

Proceeds from the company&rsquo s sale of its Malaysia properties are also able to be utilised for operational engagement, says Boldtek.

Boldtek has entered into a non-binding term sheet with Ee Chin Keong to divest its wholly-owned subsidiary, Logistics Construction on Nov 16.

 

Ee is a businessman from Malaysia who is construction and material handling equipment industry. His businesses are mainly involved in steel fabrication engineering works, mechanical and electrical engineering works, custom-made overhead crane, gantry crane, goods hoist, scissor lifter, service and maintenance of lifting equipment.

 

According to Boldtek, Ee is interested in investing in a Singapore-based construction company with a construction license that is able to bid for large scale projects.

 

&ldquo From Mr Ee&rsquo s perspective, this is a relevant business vertical along the value chain and would allow him to diversify his portfolio of businesses into a different region with lower risk in South-east Asia. [Logistics Construction] fits this profile,&rdquo says Boldtek via its statement issued on Nov 19.

 

Logistics Construction has been granted a moratorium under Section 64 of the Insolvency Restructuring and Dissolution Act 2018 but that expired on Nov 14.

 

Ee is said to be aware that Logistics Construction is present insolvent. He intends to restructure its liabilities following the proposed divestment with his group of nominees and investors (the purchaser group).

 

The consideration to be paid for Logistics Construction will be a &ldquo fair&rdquo number to be agreed between Boldtek and the purchaser group.

 

The completion of the divestment is subject to the completion of several conditions including the satisfactory result of financial and legal due diligence, the agreement on the terms of a restructuring plan, the obtaining of relevant corporate approvals and regulatory approvals.

 

After the divestment is completed, the purchaser group will provide a $1 million loan facility to be drawn down as and when required by Logistics Construction. The amount will be used as working capital to continue ongoing projects for the purpose of realising Logistics Construction&rsquo s existing contract assets.

 

The purchaser group also understands that with the benefit of the loan facility, about $3 million in value of Logistics Construction&rsquo s contract asset can be realised within a time period of up to two years. The proceeds from the realisation from the existing contract assets, up to a maximum value of $3 million, shall be set aside and deposited in a trust account and held for the benefit of the trade creditors.

 

At the end of up to two years after the first drawdown of the $1 million facility, or upon the proceeds in the trust account being more than $3 million, the proceeds in the trust account will be distributed to the trade creditors on pro-rated basis. Any amount in excess of $3 million shall be disbursed in such manner determined by the purchaser group.

 

In a separate statement, Boldtek announced that Logistics Construction has filed an application under Section 91 of the Insolvency, Restructuring and Dissolution Act 2018 to be placed under judicial management.