Highlight Silver Bird, AmanahRaya in talks

Highlight Silver Bird, AmanahRaya in talks
Business & Markets 2013
Written by Isabelle Francis of theedgemalaysia.com
Wednesday, 04 September 2013 08:22


KUALA LUMPUR: To expedite its turnaround plan, financially stressed SILVER BIRD GROUP BHD [] intends to renegotiate with its landlord AmanahRaya-REIT Managers Sdn Bhd for lower rental for the land where its manufacturing facilities are sited in Selangor.

In a filing with Bursa Malaysia yesterday, the company said it had received a letter from AmanahRaya offering an extension of the lease of all that piece of land, including an industrial warehouse complex erected thereon for a period of six months from Aug 16.

“If the company [Silver Bird] does not reply within the said seven business days, the company shall be deemed not interested to continue with the lease of the demised premises and will be required to vacate the demised premises within 30 days of the date of the said letter,” said AmanahRaya in the letter written to Silver Bird.

The bread and cake manufacturer said its board of directors is currently examining the options.

According to sources familiar with the company, the baker wants to renegotiate for better terms as it cannot afford the current high rental.

“If it fails to renegotiate the terms, it might vacate the premises,” said a source, adding that it would not be a major problem for Silver Bird to move its manufacturing plant considering it is currently operating at half its capacity.

Furthermore, the company does not need such a large plant to operate, at least for now, the source said.

This is one of the problems inherited from the previous management, which had sold the land to AmanahRaya and promised higher rental yield in a sale and leaseback agreement.

As a result, Silver Bird has been paying high rental under the sale and leaseback agreement with AmanahRaya.

AmanahRaya’s purchase consideration was RM92 million, based on filings with Bursa. Based on a yield of 6%, Silver Bird may have to fork out as much as RM6 million to pay for the lease.

By the same token, analysts said it would not be pleasant for AmanahRaya, considering that the rental received from the land alone accounts for 11% of the REIT’s gross rental income. However, it might have to give in for lower yield as the baker just can’t afford the rental, they said.

Silver Bird paid some RM7.68 million and RM7.59 million for rental of the premises for the financial years ended Oct 31, 2011 and 2012 respectively.

However, the company has defaulted on its rental payments for the period from January to May in 2012.

CIMB Islamic Trustee Bhd (the lessor) has called on the entire guaranteed sum under the bank guarantee issued by RHB Bank Bhd of RM7.3 million being outstanding rental due for the period from January to May, and the remaining sum (after the deduction of the outstanding rental) shall be treated as advance rental for the lease period up to January 2013.

Silver Bird has RM7.55 million worth of security deposits placed with AmanahRaya pursuant to a sale and leaseback transaction. The amount is imputed as non-current other receivables in its books.

Apart from the rental payments, Silver Bird has to fork out some RM7.3 million annually for rental of trucks.

A group of turnaround specialists, who call themselves Covenant Equity, last month injected fresh capital of RM16 million into Silver Bird.

This came more than a year after Silver Bird announced the discovery of a RM112 million hole in the books, which later on ballooned to RM297 million.

The board, led by chairman Datuk Gan Khuan Poh, suspended group managing director Datuk Jackson Tan, executive director Ching Siew Cheong and Lai Poh Mei, general manager of accounts and finance due to accounting irregularities.

Silver Bird’s substantial shareholders include Berjaya Group Bhd, Lembaga Tabung Haji and Koperasi Permodalan Felda Malaysia Bhd.


This article first appeared in The Edge Financial Daily, on September 04, 2013.