SINGAPORE - Catalist-listed Rich Capital said the $2 million advance payment guarantee from Rich-Link Construction (RLC) has been put on hold pending "new developments" within RLC, which is working on a solution to repay the amount owed.
This would then "render the advance payment guarantee unnecessary", the company said on Thursday (July 4) in its response to the Singapore Exchange (SGX).
The property developer had released a series of responses to queries from the bourse dated June 4, June 17 and July 2, with the latest addressing why the company did not recall the $2 million advance payment paid on behalf of PT Oxley Karya Indo Batam (OKIB), which could potentially provide comfort to its working capital in the light of an impending going concern issue raised by auditors at a recent audit committee meeting.
Rich Capital said OKIB had received a letter of undertaking from RLC - one day after the audit committee meeting - that it would deliver the guarantee within two weeks. Moreover, the payment certified by its project consultant for work done by RLC as at July 2 had already "substantially exceeded" the $2 million advance payment.
OKIB is the joint venture company with PT Karya Indo Batam (KIB) responsible for the development of its Batam development project.
In order to safeguard its interests, Rich Capital said it would be exercising its right under the terms of the letter of award to withhold payment to RLC for the work done until a performance bond is received from RLC.
The company said that since its May 23 announcement, some progress had been made by RLC in finding an Indonesian insurance company prepared to issue a performance bond which complies with the letter of award.
In its queries, SGX sought clarity on multiple occasions over the appointment of Wang Zhen Wen as OKIB's president director - and whether or not his appointment is in the interest of Rich Capital. Mr Wang is the non-independent non-executive chairman of Rich Capital and its 29.5 per cent shareholder. He is also the sole director and shareholder of RLC.
As his appointment as PT OKIB's president director has attracted queries and issues, Rich Capital said Mr Wang has offered to step down from the role to facilitate the resolution of these matters.
The group said Mr Wang was not the sole representative of Rich Capital and Oxley Batam Pte Ltd (OBPL) to PT OKIB when the decision on the $2 million advance payment was made. In addition, the daily operations of the construction project are managed by a separate project management team employed by Rich Capital and not Mr Wang himself.
"As such, the non-interested directors believe that Mr Wang's appointment as the president director of PT OKIB and as one of the representatives in Rich Capital/OBPL in PT OKIB do not prejudice the interest of Rich Capital as Mr Wang's appointments were predominately for the purpose of ensuring that the interests of Rich Capital is protected," the group added.
In its July 2 reply, Rich Capital added that it would propose in due course the appointment of the independent review, scope and terms of reference and timeline, to be cleared by the SGX RegCo.
Rich Capital shares have been voluntarily suspended since June 27, following a trading halt called on June 24. Shares of the company last closed up 0.2 cent, tripling to 0.3 cent on June 21.