Lotus submits new plan to stem losses

The plan was submitted to Lotus' six main creditors,
the source said, adding that the revised plan was crucial to stem the
its losses.



Group Lotus Plc, the British sportscar maker ultimately owned by
DRB-HICOM Bhd through Proton Holdings Bhd, has submitted a fresh plan
to put its house in order, bankers familiar with the matter said
yesterday.

The plan was submitted to Lotus' six main creditors, the source said,
adding that the revised plan was crucial to stem the its losses.

DRB-HICOM bought 100 per cent of Proton this year for more than RM3
billion and immediately started the ball rolling in restructuring Lotus.

DRB-HICOM and Proton officials could not be reached for comments but a
source from the financial sector, who has seen the revised plan, said
it was a much more realistic plan.

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Malayan Banking Bhd and CIMB Bhd are the biggest
lenders to Lotus. The others are Oversea-Chinese Banking Corp Ltd,
Export-Import Bank of Malaysia Bhd, Affin Bank Bhd and EON Bank Bhd.

Lotus obtained some RM1.3 billion in long-term facilities in April last
year to help turn around the company, with the national carmaker Proton
standing as guarantor for the loans.

The money was to be used as part of a RM2.4 billion turnaround plan that was announced a year earlier.

The turnaround plan was centred on Lotus coming up with five new sportscar models within five years for the mass market.

However, the plan had been hit with snags from day one, and by the end
of last year, Lotus was bleeding red ink and had widened its operating
loss to RM166.6 million from RM102.4 million at the end of 2010.

By July last year, the banks had stopped Lotus from drawing down money from its loan facilities.

In March, Proton said Lotus was in a technical breach of certain post-drawdown covenants on its existing long-term loans.
Following that disclosure, Hong Leong Investment Bank Research said Lotus risked having the loan facilities withdrawn.

Industry players said Lotus could not meet the financial datelines due
to the longer-than-expected time frame required for the execution of a
management shares subscription and a joint-venture agreement on product
development.

"The previous plan was basically unworkable," said the source.

Business Times understands that the amount being withheld by the banks
is about RM350 million, forcing Proton to pump in between STG5 million
and STG8 million (RM24.7 million and RM39.6 million) a week into the
sportscar maker.