MMM facing collapse after failing to repay loan
Troubled tanker operator Malaysian Merchant Marine is facing collapse after the company confirmed it had defaulted on the repayment of a primary collateralised loan totaling more than RM40.3m ($12.1m).
The company said it would not be able to pay ?any portion? of the collaterised loan.
MMM, which made all its staff redundant last week, also told the Malaysian stock exchange today it was also ?unable to provide a solvency declaration?.
This followed a statement to the Kuala Lumpur bourse late on Monday, in which company confirmed the default after it received a letter of demand on behalf of Malaysian banks, Prima Uno and Malaysian Trustees. The banks, in a letter from law firm Adnan Sundra & Low on March 8, gave the shipping company 14 days to repay the balance of the loan.
The letter warned that the company faced default interest of 3% per year above the annual loan rate of 6.9% if it failed to pay the balance.
The company said it was unable to pay the loan plus interest because it was unable to meet its obligations after the loan and Islamic debt securities were downgraded from A-id to BB+id. The RM120m debt securities have recently been further downgraded by the Malaysian Rating Corporation to CID from BB+ID.
The rating agency said the shipping company"s only revenue generating vessel, the 2004-built, 3,435 dwt MMM Ashton, was on a bareboat charter and targeted for disposal by May to meet the debt commitment. But the realisable value of the vessel had fallen from an initial $11m to around $5m as a result of the weak tanker market. The timing of the disposal was also highly uncertain.
The agency added MMM"s consolidated shareholders" equity had fallen to below 25% of its paid-up capital and was less than RM40m.
This came after the tanker company forfeited a deposit on a 19,980 dwt double-hulled chemical tanker which it planned to acquire for $38m from Singapore"s Uniships and which it saw as the key to restoring its financial health. But the deal collapsed after Uniships pulled out when the ratings agency downgraded the financial securities to BB+ID.
MMM said: ?At present, the company does not have any measures to address the default as the company will not be able to continue to operate under the present capital and debt structure in the foreseeable future.?