LCL Founder Loses Company After Dubai Debt Crisis (Update3)
By Barry Porter
Dec. 15 (Bloomberg) -- LCL Corp Bhd. Managing Director Low Chin Meng lost control of the Malaysian interior design company he founded after a debt crisis in the Gulf emirate of Dubai forced it to default on loans.
CIMB Islamic Bank Bhd. sold 16 million of Low’s LCL shares, representing his remaining 11.2 percent stake in the business, that were pledged as security against financing, Malaysian stock exchange filings show.
More than of 80 percent of Selangor-based LCL’s sales came from the United Arab Emirates last year compared to 46 percent in 2007, according to data compiled by Bloomberg, as Dubai built the world’s tallest tower and palm tree-shaped islands in a bid to lure international investors.
“When the company was growing at a fast rate it needed short-term capital to meet orders,” Nigel Foo, an analyst at CIMB Investment Bank Bhd., said in a telephone interview from Kuala Lumpur today. “To achieve this Low personally pledged his own shares.”
LCL said Dec. 10 it had been “severely” impacted by financial turmoil in Dubai and defaulted on 72 million ringgit ($21 million) of loans from Affin Bank Bhd. and Bank Islam Malaysia Bhd. because clients in the sheikhdom hadn’t paid bills. State-owned Dubai World roiled markets worldwide Dec. 1 when it said it was in talks with creditors to restructure $26 billion of debt built up during the emirate’s six-year real estate boom.
Bank Debts
LCL had 376 million ringgit of net debt as of Sept. 30, according to a Dec. 11 report by CIMB’s Foo. In addition to loans from CIMB the company borrowed from AMMB Holdings Bhd., Alliance Bank Malaysia Bhd., Bank Muamalat Malaysia Bhd., EON Capital Bhd., Public Bank Bhd., Standard Chartered Plc, Kuwait Finance House and Royal Bank of Scotland Group Plc, according to its Dec. 10 statement.
LCL jumped 8.7 percent today in Kuala Lumpur trading to close at 25 sen, giving the company a market value of 35.8 million ringgit. The stock has plunged 64.5 percent this year.
Low sold blocks of shares in the past three months, reducing his stake to 11.2 percent from 29 percent on Sept. 24, exchange filings show.
Calls to his mobile phone today weren’t answered today and officials at the company’s main office said he wasn’t there when Bloomberg called seeking comment.
Separately, the Malaysian stock exchange said today it reprimanded LCL for not submitting its annual audited accounts on time for the year ended Dec. 31 2008.
To contact the reporter responsible for this story: Barry Porter in Kuala Lumpur at bporter10@bloomberg.net
Last Updated: December 15, 2009 04:23 EST
2 comments:
I work for LCL in Dubai. Personally, I think it's a bad move to force sell all of Low's shares. Despite many challenges, he's been working so hard to keep the company afloat. Dubai is his second home. He comes so often to resolve issues together with the employees as well as gives us tremendous moral support. Now that he's no longer a shareholder, what vested interest does he have in putting further effort to turn the company around? Monies are slow coming but we have hundred of millions to recover here. I think it is in the bankers' interest to allow him and us the chance and time to recover our dues. Sigh . . . what if he were to leave the company? Would it be better off? I don't think so. It would probably leave all the creditors unpaid and employees stranded and the lenders won't recover their debts too. If only we were given more time...I just hope Low will continue to brave the tough time with us. I can't imagine what the company will become without him.
i have worked with LCL-dubai for more than 6 months. the condition was very bad, that since i joined the company on MAY 2009,non of my salary came on time...it has always been delayed for 1 month. The worst happened when non of our hard earned money came at all!!somtime in October when the metro project was about to end, we were promised our 2 last salaries be paid in 4 installments. frustrated, we have no choice but to accept their offer of 1st installment be given after termnination, the the rest of the installments shall come monthly for four months. true, we got d first installment as promised but never got the next 3. this is our hard earned money we our talking about!!we fought to complete d projects despite d hardships of not having support and fear of being put to jail for not paying our monthly bank dues!!in my case, I still have to collect 15-18k dirhams from them and i worked hard for this money..which was robbed from me..and I am not d only one who have been unfortunately promised and swindled by LCL. A lot of people out there have the same cries and laments...people who have dedicated their sacrifices to save the company's image just to be betrayed by the same..to Mr.LOW, I hope you will keep your word as there lots and lots of people who are still hoping you would.
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