Malaysia’s Lion Corp falls into financially distressed status

Shares of Lion Corp Berhad (LCB) tumbled 26% on Monday October 28 after it was declared a Practice Note 17 (PN17) company on the Malaysian stock exchange.

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At 2.45pm in local trading hours, LCB – the parent company of debt-laden Megasteel Sdn Bhd – was trading at 13 sen ($0.04) per share, down from its Friday’s closing price of 17.5 sen ($0.06) per share.

The company had announced last Friday in a filing to Bursa Malaysia – the country’s stock exchange – that it is “an affected listed issuer under PN17 of the main market listing requirements” of the exchange.

“The auditors have expressed an emphasis of matter on LCB and its subsidiaries’ ability to continue as a going concern in the latest audited consolidated financial statements for the financial year ended June 30 2013 and the shareholders’ equity of LCB on a consolidated basis as at June 30 2013 is less than 50% of the issued and paid-up capital of the company,” the filing read.

A PN17 company is one whose financial condition and level of operations on a consolidated basis, in the opinion of Bursa Malaysia, does not warrant continued listing on the exchange.

On being designated a PN17 company, LCB is required to comply with certain requirements.

Among them, it must submit a regularisation plan within twelve months to the country’s Securities Commission or Bursa Malaysia, and will be required to implement the said plan within a stipulated time frame to maintain its listing status.

In the event LCB fails to comply with the obligations to regularise its condition, the company said all its listed securities would be suspended from trading on the next market day after five market days from the date of notification of suspension and de-listing by Bursa Securities. De-listing procedures shall be taken against the company, subject to the company’s right to appeal against the de-listing, it said.

The company said it is looking into formulating a plan to regularise its financial condition and that it would make an announcement in due course.

LCB is a unit of the Lion Group, one of Malaysia’s largest conglomerates. The group is also the country’s biggest steel producer.

LCB owns Megasteel, the first integrated steel mill in Malaysia to produce flat steel products, with capacity of 3.2 million tpy of hot rolled coil and 1.45 million tpy of cold rolled coil.