Waste-to-energy company USP Group announced that its wholly-owned subsidiary Supratechnic will be disposing off its property at 16A Joo Koon Circle to Liang & How Contractor for a consideration of $5.3 million. Liang & How was granted the option to purchase (OTP) on Nov 22, and will expire on Dec 6. The property is Supratechnic's headquarters that is in the business of wholesale of marine equipment and accessories.
The consideration was arrived at by an independent valuer RHT Valuation, commissioned by the group, as well as determined on a willing-buyer-willing-seller basis.
As at Nov 22, Liang & How, in accordance to the OTP terms have paid a sum of $53,000 or 1% of the consideration to United Overseas Bank (UOB) to cover the group’s existing mortgage on the property.
The property has been mortgaged to UOB under a mortgage executed by Supratechnic in favour of UOB. USP’s board is of the view that the this disposal is in the best interests of the group as it will allow it to redeem the mortgage as well as reduce the its outstanding trade financing and other outstanding bank loans.
The net proceeds from the divestment is estimated to be about $5.19 million. The net proceeds shall be transferred to UOB for the purposes of repaying the outstanding trade financing and the defaulted bank loans.
The group’s outstanding trade facilities and defaulted bank loans arises from previous boards and management of the group that had caused it to drawdown $9 million in trade financing and failed to reduce the financing charges imposed on the group. Further, the previous boards and management had caused the group to default on outstanding bank loans of approximately $1.67 million due to the group’s principal banker, UOB.
The property is currently mortgaged in favour of UOB. As such, and due to the defaulted bank loans, the UOB is entitled to exercise its rights pursuant to the mortgage which include but are not limited to a power of sale in the event of default. UOB has on various occasions indicated its intention to seek foreclosure of the property to settle the outstanding amounts owed by the group.
However, in the event that such actions are taken out by UOB and the property is disposed at a distressed sale price, the amount of the said distressed sale price will be less favourable than the consideration in the open market. Additionally, UOB still has the right to exercise its power of sale pursuant to the terms of the mortgage notwithstanding that shareholders’ approval is not granted for the proposed disposal.
Shares in USP Group closed at 7.9 cents on Nov 22.