TA Corporation’s wholly-owned subsidiary, Tiong Aik Construction, has been placed under provisional liquidation as it is unable to pay its debts, the group said in a bourse filing on Monday (Jul 17).

Tiong Aik Construction is principally engaged in building and construction works. Both Lin Yueh Hung and Ng Kian Kiat from RSM Corporate Advisory have been appointed as joint and several provisional liquidators.

TA Corporation noted that the board of directors of Tiong Aik Construction resolved to appoint provisional liquidators after assessing that its financial condition was such that it was “presently unable to pay its debts as and when they fall due”.

Tiong Aik Construction is currently experiencing an “acute tightening” of cash flow arising from difficulties in collecting payments and retention monies, partly due to potential liquidated damages claims, the company said.

At the same time, the subsidiary has had to meet increasing demands for additional costs and funding to address labour and material price hikes.

Heightened interest rates have also led to higher borrowing costs and an unfavourable financing environment, the company noted.

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These circumstances, coupled with a “slower-than-expected” take-up of available-for-sale properties developed by the group, have “limited the extent to which the group is able to continue supporting the cash-flow requirements for Tiong Aik Construction and its ability to secure new projects in light of its current financial condition”, it said.

TA Corporation has also requested voluntary suspension of the trading of its shares as a matter of “prudence”, pending engagement with its stakeholders and clarity on the financial position of the company, as well as the group.

It noted that the group plans to “engage in a broader and more holistic manner with its lenders, noteholders, business partners, suppliers and customers in relation to the provisional liquidation and its consequent implications on the group”.

In addition, the company has “exposure from parent guarantees and other forms of financial support for Tiong Aik Construction and projects undertaken by it in its ordinary course of business, and (there is) the possibility of cross-defaults being triggered by the provisional liquidation for loan facilities taken by the other members of the group”.

“As the board and management are still in the midst of evaluating the situation, the trading suspension seeks to allow disclosure and dissemination of relevant information prior to trading resumption and avoid market confusion,” it said.

TA Corporation’s board of directors has appointed Deloitte & Touche Financial Advisory Services – led by Tan Wei Cheong – as financial adviser and Reed Smith Resource Law Alliance – led by Johnny Lim – as legal adviser to assist the board with a review of the financial position of the group, as well as advice on the next steps to be taken.

Shares of TA Corporation last closed at S$0.073 on Jul 14, before trading was suspended.