KUALA LUMPUR (April 3): Boustead Heavy Industries Corp Bhd (BHIC) will receive a repayment sum of RM49.7 million, as a result of the write-off of the RM384.43 million net debt owed by Lumut Naval Shipyard Sdn Bhd (Lunas).

Both parties will enter into an intercompany trade receivables settlement agreement (ITRSA), after BHIC has obtained its shareholders’ approval.

Note that the proposed ITRSA is one of the conditions precedent to be fulfilled in the share sale agreement in relation to BHIC’s proposed disposal of its 20.77% stake in troubled Lunas — formerly known as Boustead Naval Shipyard Sdn Bhd (BNS), to the Ministry of Finance (MOF) for RM1.

On April 1, BHIC announced that the group and MOF had sought for a sixth extension to the end of this month for the stake disposal exercise.

Of the RM49.7 million repayment sum, BHIC intends to allocate RM45 million for the redemption of redeemable preference shares issued to Boustead Holdings Bhd (BHB). It also plans to allocate RM3.7 million for working capital purposes and RM1 million for the estimated expenses related to the proposals.

Lunas has been in the spotlight for failing to deliver six littoral combat ships (LCS) for the navy on time.

In the last quarter of 2023, it booked an allowance for expected credit losses of RM261.4 million owed by Lunas, resulting in a higher net loss of  RM256.72 million compared to RM26.48 million over the same period a year earlier,

For the full year of 2023, BHIC’s net loss also widened to RM263.88 million from RM19.92 million a year ago.

Shares of BHIC were down 2.5 sen or 5.3% to 45 sen at Wednesday’s market close, valuing the group at RM253.9 million. Year to date, the stock has lost 6.25%.

The Armed Forces Fund Board (LTAT) owns a 72.38% stake in BHIC through BHB.