1. INTRODUCTION

The Company’s wholly-owned subsidiary, namely Kota Laksamana 101 Ltd (“KL101”), have defaulted in its instalment payments to Export-Import Bank of Malaysia Berhad (“EXIM Bank”).

a. Date and reasons for the Default in Payment

KL101 had, on 17 May 2019, received a notice of demand for the outstanding instalment payments to EXIM Bank as follows:

KL101 is not able to meet its obligation to repay EXIM Bank due to financial constraints and therefore had defaulted its payments to EXIM Bank.

The loan with EXIM Bank was taken for the financing of the pipe lay barge, Kota Laksamana 101. It was an Islamic Facility (Ijarah) and the drawn down amount was USD57,459,534 in August 2014. The total loan amount outstanding as at 16 May 2019 was USD42,318,732.81. The monthly repayment for the loan is on a step-up basis for the duration of the loan until 2024. The monthly repayment of the loan pursuant to the Agreement for the calendar year 2019 is USD600,000/month which includes the applicable profit rate. For further clarity, the amount due and owing to EXIM Bank of USD2,654,211.11 as at 16 May 2019 includes both principal and profit.

b. Measures by the Company to address the Default in Payment

The Company is in the midst of finalising a comprehensive plan to address the Group’s current financial concerns which may include restructuring all its banking facilities.

c. The legal implications of the default including the extent of the Company’s liability in  respect of the obligations incurred under the agreements for the indebtedness

In the event of default in payment, the lenders shall have the right to declare the banking facilities therein be cancelled and all sums outstanding under the respective facilities shall become due and payable immediately. Following thereto, the lenders may enforce on the securities created under the respective facilities, if any.

d. Business, financial and operational impact of the Default in Payment

The Default in Payment may aggravate the current financial concerns of the Group. The lack of financial support from financial institutions is expected to have a material adverse impact on the business and operations of the Group. The Group shall endeavor to continue its other remaining business operations notwithstanding the default and will engage with the lenders and suppliers for their continuous support.

e. Cross default

The default in payment will give rise to an event of default by virtue of the cross default provision under the loan documents of the financing facilities undertaken by the Company.

f. Whether the subsidiary company which has defaulted is a major subsidiary company

KL101 is a major subsidiary of Barakah.

2. WHETHER THE COMPANY IS SOLVENT

After taking into consideration the Group’s current cash flow position vis-à-vis its total debt obligations payable and available cashflow, the Company is unable to declare that it is solvent pursuant to Paragraph 9.19A(4) of the Listing Requirements.

In arriving at the above, the Board has considered and assessed the financial position and consolidated projected cash flow of Barakah and formed the opinion that Barakah will not be able to service all its debts as and when they fall due in the next 12 months in its entirety.

Arising from the Default in Payment and the Company is unable to declare that it is solvent, the Company has triggered the prescribed criteria under Paragraph 2.1(f) of the Practice Note 17 of the Listing Requirements.

Nevertheless, the Group is in the midst of finalising a scheme to restructure the Group’s debt with EXIM Bank and past due creditors as part of a comprehensive plan to address the Group’s current financial concern, so that the Group will be able to continue its current operations and meet its obligations for the current projects that the Group is currently executing.

This announcement is dated 21 May 2019.