THE EDGE DAILY: Dubai Investment Group’s (DIG) withdrawal from a RM184.94 million tripartite joint venture involving financially- troubled PECD Bhd is merely the tip of the iceberg of the myriad of problems PECD now faces, sources said.
Sources familiar with its operations in the Middle East said its wholly owned subsidiary PECD LLC had not paid its staff in Dubai salaries since last August.
On June 21, PECD signed a Heads of Agreement with DIG and Dubai Properties to formalise their intention to enter into the tripartite 200-million dirham (RM184.94 million) JV that would have seen the two Dubai companies holding a 70% stake in PECD LLC.
PECD is currently holding 49% stake in PECD LLC with the remaining 51% held by a local partner. DIG, currently a substantial shareholder of PECD, is the global financial investor of Dubai Holding, which is headquartered in the emirate of Dubai with local office network worldwide from New York to London and Kuala Lumpur.
PECD on Monday said that it had received a letter from DIG notifying of its intention not to proceed with the proposed joint venture.
It said the company had written to seek clarification on the termination, as there were no reasons provided for the change in position and was awaiting the reply from DIG on its final decision.
A source said PECD LLC had been facing cash flow difficulties since another contract in the Oceana project in Dubai was terminated by the developer.
“Hari Raya looks bleak for the staff there but PECD is trying to resolve matters at the group level to ensure the salary issues are settled as soon as possible,” said the source.
This piece of news possibly signals the shambles in which PECD’s Arabian dreams are left in after a few years of being caught in a mirage of contracts the company had boasted two years ago.
The revelation by the source confirmed the contents of an email sent by a group calling itself “Friends of Zainal Adnan Khairudin in UAE” that PECD staff in Dubai have not been paid their salaries since August.
Zainal Adnan is the PECD employee currently detained by the Dubai police in connection with signing the company’s dishonoured cheque. The group also claimed that Zainal Adnan had been in detention for over 24 days.
It said the conditions for release were for PECD to settle the amount claimed by the supplier to get the case dropped, and for the company to post RM1.85 million bail while settling the dispute under the civil case.
Last month when the arrest of the officer surfaced, PECD in a statement said it was negotiating towards an amicable solution with the supplier, Kele Contracting.
“However, the group is also investigating the circumstances surrounding the appointment of Kele by PECD LLC and the terms thereof that have eventually led to the incident. These involve issues related to the non-compliance to the group’s internal policies and financial limits of authority,” it said.
PECD already has various outstanding claims against its clients totalling RM1.3 billion, which involve the Sudan Marine Terminal Facilities, Dubai International Financial Centre, Prince Court Medical Hospital and Putrajaya Precinct 11 projects.
In March this year, Datuk Seri Dr Awab Sheikh Abod and Shakir Jamil Fisal emerged as new directors and substantial shareholders, fuelling market talk that they were spearheading the turnaround initiatives to stabilise the company’s operational and financial capability.
Its chief executive officer Rosman Abdullah had said the company would aggressively pursue its claims, while at the same time focusing on stabilising its financial position by means of stricter cost control and disposal of several non-core assets.
Last July, Malaysian Rating Corp Bhd (MARC) downgraded its rating on PECD’s RM200 million serial fixed-rate bonds to BBB- from BBB with a developing outlook, reflecting its weakened financial profile, rising overall business risk and the uncertainty in the timing of any recovery in credit protection measures.
MARC viewed with concern the recurring incidences of contract termination, project delays and cost overruns to the extent that PECD’s capacity to close new contracts may be impaired. For the second quarter ended June 30, 2007, it posted a net loss of RM2.57 million on revenue of RM107.5 million.
PECD’s share price has also been hovering in the mid- 50 sen range over the past one month, with not much positive news flow on the company. The stock rose 0.5 sen to 53.5 sen yesterday, with a total of 4.94 million shares done.