Published January 14, 2009

Jurong Tech faces winding up over loans

OCBC demands payment of S$21.9m and US$23.3m within three weeks

By CHEW XIANG

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(SINGAPORE) Jurong Technologies Industrial Corp may have to repay OCBC Bank over S$56.5 million in loans by the end of the month or face winding up.

The company, a contract manufacturer, said yesterday that it has received a statutory demand dated Jan 9 for two sums of S$21.9 million and US$23.3 million to be repaid within three weeks, otherwise 'OCBC Bank shall be entitled to commence winding up proceedings'.

Sources said that Jurong Tech has been unable to pay interest on its loans to the bank for some time now. It is said to have at least five other creditor banks, including at least one other local bank.

Jurong Tech said it has met with its creditor banks and 'was of the view' that they would 'continue to negotiate with the company . . . in respect of their alleged outstanding liabilities'.

As at Sept 30, the company had unsecured borrowings of over S$318 million, S$282.3 million of which was due in one year or less, or on demand, according to its latest financial statements. In its 2007 annual report, the company disclosed it held S$298 million in unsecured bank loans denominated in various currencies, almost of all which was due in 2008.

For the three months to Sept 30, the company recorded net cash from operating activities of S$42 million and held cash and cash equivalents of S$8.09 million. The company spent S$20.2 million to repay unsecured bank loans.

Reported revenue fell 45 per cent to S$108.6 million for the three months to Sept 30 while net profit fell 95 per cent to S$714,000, from over S$13.4 million in the corresponding year-ago period.

OCBC's demand for repayment is said to be 'technically' unconnected to alleged irregularities with Jurong Tech's accounts uncovered in December.

Jurong Tech's auditors Ernst & Young had then discovered alleged irregularities in the administration of receivable financing facilities. The company then appointed special auditors to investigate and said at the time that all its banks 'remain in support of the company'.

In November, OCBC research analyst Kevin Tan downgraded the stock, saying that sales were hurt by continued decline in a major customer's handset-related orders. Mr Tan said that 'we believe JTL is likely to be limited by financing options - it has also revealed that it is currently facing very tight credit condition' and added that he was 'increasingly concerned of its ability to fund its working capital and expansion plans'.

Jurong Tech yesterday called a trading halt to its shares, which were last traded at nine cents. Trading resumes this morning.