Hoe Leong Corp proposes sale of 2 vessels for US$1.7m

MAINBOARD-LISTED Hoe Leong Corporation is proposing to sell two of its vessels for US$850,000 each, or a total of US$1.7 million, to Allianz Offshore Ship Management.

Two units of Hoe Leong have entered conditional memoranda of agreement (MOA) with Allianz Offshore for the transactions, the company said in a bourse filing on Tuesday. The sale is expected to generate net proceeds of about S$2.3 million, while resulting in a net loss on disposal of about S$3.15 million. 

As at end-June, Hoe Leong's vessel Arkstar Eagle 1 had a net book value of S$2.75 million, while the vessel Arkstar Eagle 3 had a net book value of US$2.7 million. But based on an independent valuation, both vessels have a market value of about US$580,000 each, Hoe Leong said in its filing. 

In addition, the vessels' class licenses have just expired and both are due for drydocking, which would cost about S$620,000 per vessel. 

Hoe Leong is also under financial pressure, having received a statutory demand for S$5.7 million from UOB in late-August. The sale of the vessels is part of the restructuring plan Hoe Leong is discussing with UOB. 

Arkstar Eagle 1 is mortgaged to Sing Investments & Finance (SIF), while Arkstar Eagle 3 is mortgaged to RHB Bank. As at Tuesday, Hoe Leong owes SIF and RHB S$2.43 million each. 

The proposed sale will require shareholders' approval, unless SGX grants a waiver. It is also contingent on the buyer Allianz Offshore repaying over US$465,000 due to two subsidiaries of Hoe Leong. The deal will also need to be green-lighted by RHB and SIF. 

If the sale is not completed within the next 90 days, Allianz Offshore has the option to terminate the MOA. 

Shares of Hoe Leong last traded at S$0.002 before they were suspended in September.