by S BIRRUNTHA / pic by MUHD AMIN NAHARUL
GEORGE Kent (M) Bhd has accepted Malaysian Resources Corp Bhd’s (MRCB) RM53 million cash offer to buy a 50% stake in joint venture (JV) firm, MRCB George Kent Sdn Bhd (MRCBGK).
In a filing to Bursa Malaysia yesterday, George Kent noted that MRCBGK is a JV company between MRCB and George Kent, and is the contractor of the Light Rail Transit Line 3 (LRT3) project.
The group said the cash proceeds of RM53 million from the sale of its 50% stake will be utilised as working capital by March 31, 2022.
“MRCBGK was incorporated as a special purpose vehicle with a single business to undertake the LRT3 project with a finite life ending Feb 28, 2024.
“To date, 60% of the contract has been completed,” George Kent noted in a statement.
Currently, under the contract, George Kent has provided a 50% proportionate joint and several corporate guarantees to Prasarana Malaysia Bhd to guarantee the due performance of MRCBGK for the construction and completion of the contract for the LRT3 project.
There is also a performance bond of 5% of the contract price amounting to RM568.6 million in place with Prasarana.
George Kent added that upon completion of the contract, MRCBGK is to provide a design guarantee security of 5% of the contract price amounting to RM568.6 million for a further period of five years from the date of completion of the contract, which is until 2029.
It added that this transaction will free the group from any exposure to future liabilities in respect of the contract for the LRT3 project valued at RM11.4 billion.
“Taking into consideration the factors set out above, the board is of the view that it is in the best interest of the group to accept the cash offer to sell its GK Rail’s 50% equity interest in MRCBGK,” it said.
George Kent also noted that the sale will result in a loss on disposal of RM4.24 million, but added that the group had benefited from a share of profit contribution of RM57.241 million up to June 30, 2021, from its investment in MRCBGK. On Sept 14, MRCB had offered to buy George Kent’s stake, or sell its own 50% stake to George Kent.
This was after an arbitration in May ruled in favour of MRCB in a dispute about financing options for the JV company.
The LRT3 project started in August 2015 with an initial budget of RM10 billion to serve some two million people along the Bandar Utama-Johan Setia route, before costs escalated to a whopping RM31.65 billion.
It was among several mega infrastructure projects reviewed by the federal government after Pakatan Harapan came to power in May 2018.