Tiong Nam Logistics buys back assets from SPV

by **Cals** Wed 31 Jul 2013, 10:29

Tiong Nam Logistics buys back assets from SPV
Business & Markets 2013
Written by theedgemalaysia.com
Wednesday, 31 July 2013 10:15

KUALA LUMPUR: TIONG NAM LOGISTICS HOLDINGS [] Bhd is re-purchasing its assets disposed to a special purpose vehicle (SPV) under a sale and lease back arrangement in 2006 for RM176.3 million.

In an announcement yesterday, Tiong Nam said it was exercising an option to acquire from SPV ABS Logistics Bhd (ALB) 20 PROPERTIES [] in a deal involving RM125 million in cash and the balance of RM51.3 million owing to ALB.

Tiong Nam will take up borrowings of RM125 million to fund the transaction.

The assets were sold to ALB in 2006 to free up Tiong Nam’s balance sheet. According to the announcement, 23 properties were sold to ALB for about RM191.56 million under an arrangement where the company leases back the properties.

The exercise allows the logistics company to raise funds to repay its borrowings and finance its working capital.

Under the agreement, Tiong Nam had the option to purchase the assets from the fifth year and the option would expire 12 months prior to the expiry of the lease period of 10 years.

Tiong Nam said the assets are instrumental in its total logistics business and if the option to re-purchase is not exercised by the end of the tenure, ALB will be free to sell the assets to a third party.

If this happens, there is no assurance the new owner or owners of the assets will grant a lease on the use of Tiong Nam.

“As such, the proposed acquisition provides the assurance for Tiong Nam that the assets will not be disposed of to any third party, thus preventing disruptive links in the group’s operations. The proposed acquisition will also enable Tiong Nam to have better control over the administrative matters in relation to the logistic assets,” it said.

Of the 23 assets held by ALB, Tiong Nam had disposed of two of them. After the current exercise, ALB will be left with one asset that currently houses Tiong Nam’s corporate headquarters.

Tiong Nam said the asset left with ALB is not used for its operations and it has parcels of land in other parts of Johor to build a new corporate headquarters.

This article first appeared in The Edge Financial Daily, on July 31, 2013.