Shares in interior design firm LCL Corp Bhd plunged yesterday to their lowest level post-listing in 2004 as worried investors dumped the stock on concern it may face bankruptcy because of the Dubai financial crisis.
On Thursday, LCL said it did not pay loans amounting to RM72mil and was facing further defaults.
The company said it was “deliberating the solvency status of the group’’ and would make further announcements within the required timeframe.
“This news is a major de-rating catalyst, along with worsening news flow and continuing collection problems in Dubai,’’ CIMB Research said yesterday.
“The company offered so much potential, but its operations and balance sheet were hit hard after working conditions in Dubai deteriorated in the aftermath of the property crash in the fourth quarter of 2008,’’ it said.
LCL shares tumbled 10 sen, or 31%, to 22 sen on heavy volume of 41.4 million units.
On Thursday, the company told Bursa Malaysia that it had been “severely impacted” by the financial turmoil in Dubai, where property prices have collapsed resulting in delay and non-payment of its receivables.
“Hence, LCL and its subsidiaries have been unable to meet their repayment obligations,’’ the company said.
As at end-September, LCL’s total debt stood at RM376mil. Most of the loans are short-term financing and almost all of its borrowings were intended for working capital.
The group said it had defaulted on loans worth RM69.4mil due to Affin Bank Bhd and RM2.6mil to Bank Islam Malaysia Bhd.
LCL said due to the overall tight working capital position, the defaulted credit facilities would have a consequence on the group’s bank borrowings, which would also be declared default by other banks under the cross-default clause.
Other lenders used by LCL with cross-default terms include AmBank Bhd, Alliance Bank Malaysia Bhd, Bank Muamalat Malaysia Bhd, EON Bank Bhd, CIMB Investment Bank, Exim Bank, Kuwait Finance House (M) Bhd, Public Bank Bhd, Standard Chartered Bank Malaysia Bhd and Royal Bank of Scotland Group Plc.
LCL had borrowed money from the banks to fund its aggressive expansion, but the group’s venture in Dubai had soured.
“The challenges are not only hitting LCL, but also the main contractors in Dubai, including (South) Korean and Japanese contractors,’’ CIMB Research said.
On Thursday, LCL said it did not pay loans amounting to RM72mil and was facing further defaults.
The company said it was “deliberating the solvency status of the group’’ and would make further announcements within the required timeframe.
“This news is a major de-rating catalyst, along with worsening news flow and continuing collection problems in Dubai,’’ CIMB Research said yesterday.
“The company offered so much potential, but its operations and balance sheet were hit hard after working conditions in Dubai deteriorated in the aftermath of the property crash in the fourth quarter of 2008,’’ it said.
LCL shares tumbled 10 sen, or 31%, to 22 sen on heavy volume of 41.4 million units.
On Thursday, the company told Bursa Malaysia that it had been “severely impacted” by the financial turmoil in Dubai, where property prices have collapsed resulting in delay and non-payment of its receivables.
“Hence, LCL and its subsidiaries have been unable to meet their repayment obligations,’’ the company said.
As at end-September, LCL’s total debt stood at RM376mil. Most of the loans are short-term financing and almost all of its borrowings were intended for working capital.
The group said it had defaulted on loans worth RM69.4mil due to Affin Bank Bhd and RM2.6mil to Bank Islam Malaysia Bhd.
LCL said due to the overall tight working capital position, the defaulted credit facilities would have a consequence on the group’s bank borrowings, which would also be declared default by other banks under the cross-default clause.
Other lenders used by LCL with cross-default terms include AmBank Bhd, Alliance Bank Malaysia Bhd, Bank Muamalat Malaysia Bhd, EON Bank Bhd, CIMB Investment Bank, Exim Bank, Kuwait Finance House (M) Bhd, Public Bank Bhd, Standard Chartered Bank Malaysia Bhd and Royal Bank of Scotland Group Plc.
LCL had borrowed money from the banks to fund its aggressive expansion, but the group’s venture in Dubai had soured.
“The challenges are not only hitting LCL, but also the main contractors in Dubai, including (South) Korean and Japanese contractors,’’ CIMB Research said.
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