Magna Prima defaults on term loan facility involving RM37.79m from Alliance Bank

KUALA LUMPUR (June 25): Property developer Magna Prima Bhd has defaulted on a term loan facility from Alliance Bank, which amounts to RM37.79 million in principal and accrued interest payments due as at June 17, 2020.

The default arose after it failed to pay the instalment payments on the principal and interest since March this year.

"Magna Prima encountered difficulties to meet the principal and interest obligations for the term loan facility from Alliance Bank since March 2020. This is largely due to delay in project implementation for the parcel of land, located at Seksyen 15, Shah Alam, and will be spread over approximately 20 acres, which is held by Magna Ecocity Sdn Bhd (MESB), a subsidiary of Magna Prima Bhd.

"As such, the subsidiary was badly affected with disruption in cash flow which caused financial constraint to meet the bank obligations then," Magna Prima said in a filing with Bursa Malaysia yesterday.

The market value for the land stood at RM200 million as per land valuation done in 2019, it said. "As such, with this, as the land market value is secured against the bank facilities with Alliance Bank, Magna Prima and MESB are in the positive position," it added.

Magna Prima had received a letter of demand cum recall dated June 18 from the bank for the balance of the term loan principal and accrued interest payments, and for the cancellation of the term loan facility. "The total amount outstanding of the defaulted term loan facility represented 7.2% of its latest audited consolidated net assets of RM523.7 million as at Dec 31, 2018."

To address the issue, Magna Prima said it is engaging consultants to discuss with the bank on terms of repayment and to possibly reschedule the facility.

“In the opinion of the company, Alliance Bank should not have proceeded with the legal proceedings. The company is actively scheduling for meetings and will submit a comprehensive proposal to reschedule the loan facilities in due course.

"There would not be any significant impact of the default in payment on the business, financial and operation of the remaining business of the group," it added.

Magna Prima shares slipped one sen or 1.2% to settle at 82 sen yesterday, giving it a market capitalisation of RM272.75 million.

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