KUALA LUMPUR: Chin Hin Group Bhd’s subsidiaries are selling RM76.45 million of real estate assets to major shareholders to raise cash to repay bank loans and finance working capital.
In a filing to Bursa Malaysia, the company said the exercise entails a disposal of entire equity interest in Ace Logistic Sdn Bhd to PP Chin Hin Realty Sdn Bhd by its wholly-owned subsidiary Metex Steel Sdn Bhd for RM20.8 million and the disposal of properties by PP Chin Hin Sdn Bhd to Midas Signature Sdn Bhd for RM55.65 million cash.
With the disposal, PP Chin Hin will enter into 14 tenancy agreements with Midas for the proposed tenancies of five units of shop offices at Kuala Lumpur, seven units of shop offices at Alor Setar, Kedah and 89 units of car parks at Kuala Lumpur.
Ace Logistics owns two semi-detached factory at Nilai, Negeri Sembilan, currently rented to Metex Steel, which is using it for manufacturing of wire mesh.
Metex Steel sublets part of the factory to a third party, Formino Metal Sdn Bhd, which is using it for manufacturing of metal roofing.
Chin Hin filing further noted that Metex Steel will continue to rent Nilai Property from Ace Logistic after the disposal of Ace Logistic.
It also owns two units of single storey terrace house at Taman Wira Mas, Kepala Batas, Kedah, which are currently vacant.
Chin Hin said in view of the capital requirements of the group’s operations and financial obligations, the company recognises the need to pursue an asset light strategy and to monetise its non-core assets to raise additional funds to enhance the group’s financial position.
The proposals provide an avenue for the group to unlock the value of its property assets at their market value and raise cash proceeds which can be channelled towards the group’s business operations.
The proposed tenancy provides the group with certainty that its on-going business operations will not be disrupted, Chin Hin filing noted.
Further, the proposed tenancy provides for the group to renew the tenancies at the group’s option which allows the group to continue operating its headquarters at Jalan Kuchai Lama, Kuala Lumpur and its branch offices and warehouse in Alor Setar.
As for the Nilai factory, Chin Hin filing noted that the tenancy will only expire in December 2020 with automatic renewal up till December 2023, and the option to renew for further five years, ensuring the group’s wire mesh manufacturing business will not be disrupted.