KUALA LUMPUR: PECD Bhd, which is now under PN17 classification due to a significant deficit in its shareholders’ fund, is confident that its lender Bank Pembangunan Malaysia (BPM) will not face any recovery issues for the outstanding loan amounting to some RM406.2 million.

The loan was procured by its wholly-owned Peremba Construction Sdn Bhd, now known as PECD Construction, in relation to the Kuala Lumpur Flood Mitigation (KLFM) project.

In a statement on April 3, it said: “In line with BPM’s requirement, Jabatan Pengaliran dan Saliran Malaysia (JPS) has provided the necessary undertaking to BPM to pay the bank for the amount payable to PECD Construction Sdn Bhd under the contract.

“With construction works still in progress, PECD is confident that there would not be any recovery issues to be faced by BPM for the outstanding loan amount,” it said, adding that being listed under PN17 would have minimal impact on the project’s progress.

PECD was responding to a report by The Edge on March 31, 2007, regarding its potential in causing severe dents in BPM over PECD's RM406.2 million non-recourse deferred payment loan granted by the bank.

In 2003, Peremba Construction had secured a RM528.9 million flood mitigation project, Package B- Batu Jinjang Ponds and related flood diversion channels, from the Department of Irrigation and Drainage. The works are part of the overall KLFM project.

PECD had secured a deferred payment term loan from BPM, via an assignment of all contract proceeds in relation to the KLFM project and a corporate guarantee. According to its 2006 annual report, the loan had increased further to RM406.2 million.

The group said construction works at the KLFM Package B project was in full swing, whereby its overall physical completion rate had reached 93.7%.

It said: “The flood mitigation project, which consists of two diversions — namely, the Gombak Diversion, and the Keroh Diversion — have reached physical completion of 99.6% and 86.2% respectively.”

Nevertheless, PECD said PECD Construction had been granted an extension of time from JPS to complete the project, from its earlier expected completion date of Dec 31, 2007, mainly due to design issues, weather conditions and scarcity of materials.