Astaka unit receives letters of demand for $41.3m owed to contractor

SINGAPORE - Catalist-listed property developer Astaka's wholly owned indirect subsidiary, Astaka Padu Sdn Bhd (APSB), owes a late payment of RM125.3 million (S$41.3 million) plus interest to a construction firm it had hired in August 2015.

Solicitors representing the creditor, China State Construction Engineering (M) Sdn Bhd (CSCE), had sent three letters of demand to APSB, with the latest one received on July 11, 2019.

The group's board was made aware of the letters of demand only after the release of its full year results on Aug 29, Astaka said.

A loan agreement related to the construction agreement was struck on April 12, 2017, of which APSB still owes RM46.5 million to CSCE as at June 30, 2019.

The interest-free loan was to be paid by June 30, 2017, and was secured against Malaysian land parcels owned by Bukit Pelali Properties Sdn Bhd, a joint venture of APSB.

It included an option to grant APSB a final three-month extension with a late interest charge of 8.5 per cent per annum on the outstanding loan amount, which APSB did not take up.

APSB is currently negotiating with CSCE to extend the loan repayment deadline.

The group had not accounted for the late interest payment in Astaka's financial year ended June 30, 2018, which amounts to about RM4 million.

A prior year adjustment would need to be made to the audited consolidated results of the group, it said.

Astaka's board was only informed of the oversight - which requires a prior year adjustment - on Aug 29, 2019, after it had provided its in-principle approval to the results announcement, Astaka said.

After consulting its sponsor, PrimePartners Corporate Finance Pte Ltd, the company's board intends to appoint Ernst & Young Advisory Pte Ltd as an independent reviewer for what led to the oversight, including any lapses in internal controls.

The group has in the meantime requested a voluntary suspension of trading in its shares after first calling a trading halt on Sept 2.

Its shares had closed flat at $0.088 before the trading halt.