Palm | Kelapa Sawit

PHARMACEUTICAL company Hovid Bhd has reduced its shareholding in subsidiary Carotech Bhd to 42.84 per cent, having sold off some 150 million shares in the latter over the past month, to pay off debts.

In its filing to the stock exchange yesterday, Hovid said it had, in the last two weeks, sold off 70 million more shares, or 7.67 per cent stake in its subsidiary Carotech Bhd for RM4.9 million.

Incidentally, Lembaga Tabung Haji (LTH) has emerged as a substantial shareholder in Carotech. Separate filings to the stock exchange showed the pilgrim fund had been accumulating Carotech shares. As of yesterday, LTH holds 8.85 per cent stake.

Earlier, from 17th to 27th August 2010, Hovid sold 80 million Carotech shares of 10 sen each, comprising of 8.77 per cent stake for RM5.6 million.

Money raised from the sale of Carotech shares is being channelled to pay off Hovid's bank loan. Last year, Hovid borrowed RM20 million from Affin Investment to subscribe for new shares under a rights issue.

Hovid, yesterday, clarified that its' August and September sale of Carotech shares will help narrow losses for the year ended June 31 2010 to RM4.7 million, and not RM3.7 million reported earlier.

Although the sale of Carotech's shares were done at a loss, Hovid said it had to reduce its gearing from 0.46 to 0.43 times and mitigate the risk of margin call.

Hovid's debt problem emanated from Carotech defaulting on loans with several banks totalling US$47.76 million and RM59.11 million, respectively.

Carotech explained that high palm oil prices in the first half of 2008 and the subsequent global economic turmoil had curtailed biodiesel demand and reduced its ability to generate excess cashflow to meet its debt obligations.

Bank Negara's Corporate Debt Restructuring Committee had, since two months ago, stepped in to help Carotech restructure its debt. Carotech is now labled a Guidance Note 5 company and has until December 31 2010 to settle with its bankers.