Silver Bird: the White Knight and the "forgotten" clause

I have blogged a lot about Silver Bird in the past, some issues:

Silver linings in the Silver Bird cloud?
Taking away the silver linings that The Star saw in the timely (but otherwise horrific) announcements, and the fact that authorities (again) had not paid any heed to the many red flags, as observed by blogger "Where is Ze Moola".

Silverbird: I declare that the statements may be incorrect
About the poor director who had to make a declaration about the correctness of the financial statements, knowing they most likely were completely wrong (it later turned out they were indeed rubbish).

Silver Bird hammered by 300 million write-offs
Huge losses for a relatively small company.

Silver Bird
Shocking findings by the forensic audit, most likely indicating huge fraud by senior management.

Why is Aussie VC fund much too late with its announcements?
An Australian VC fund (CVC Limited) who announced its deposal of shares in Silver Bird almost one year too late.

However, in July finally some good news, a white knight in shining armour was helping poor Silver Bird out!

Of course, there is a price for everything, in this case a rather steep price:

• The RPS (Redeemable Preference Shares) would convert into 160 Million Silver Bird shares, equivalent to 40% of the enlarged share base
• Additional 320 million warrants would be issued
• 10% of the share of profits if SBGB achieves a pre-tax profit of RM 5 million

But lo and behold, there is more. Only on October 1, 2013 the following announcement was made:


"... in the event that the exchange of the RPS with restructured SBGB shares together with free detachable warrants on the basis of RM1.00 of outstanding RPS (plus dividend) for ten (10) SBGB shares of RM0.10 each ( or such equivalent ratio if there is a change in the par value of ordinary shares of SBGB after the regularisation plan ) with twenty (20) free detachable warrants, is not approved by shareholders of the Company or the Scheme Creditors, the investors of the RPS, namely Suncsi Holdings Sdn Bhd and Covenant Equity Consulting Sdn Bhd  (“Investors”) shall have the option to require SBGB to purchase all the RPS at the cash price of RM2.50 per RPS, within sixty (60 days after the Investors deliver such notice of exercise to the Company....."


That makes things rather different, since the RPS were bought at RM 1.00, meaning the white knight would walk away with 150% profit, a cool RM 24 million, on top of their initial investment of RM 16 million.

It also puts the future decision by the shareholders of Silver Bird in a very different light, do they actually have a choice, how can they possibly fork out the RM 24 million in case they would not approve the restructuring scheme?

According to The Edge of October 7, 2013: "The condition was inadvertently omitted from the original announcement".

How many experts (auditors/accountants/lawyers etc.) had knowledge of this agreement, both from the side of Silver Bird, its major shareholders, the white knight, the regulators, etc.?

This is really a huge blunder, how could anybody "forget" to include this in the initial announcement to Bursa?

With all the above conditions in place, the white knight turned out to be not so white after all. Which is unfortunately often the case in restructuring schemes.

More bad news, the auditor of Silver Bird announced its intention to resign. Auditors resigning is another well known and large red flag, as if there were already not enough of them .....

Update on 4 alleged fraud cases

[1] Silver Bird announced its results, sales is falling of a cliff, it can hardly book a gross profit. The only positive thing I noticed is that its Loss After Tax can be remembered easily: RM 11,111.


[2] Xian Leng announced its results, its operations have fallen to a pathetic level, I don't think it would even have been allowed on the ACE market with those tiny sales, RM 5M for the half year resulting in a loss of RM 1.5M.


[3] Genneva Malayisa; The Star wrote: "Six Genneva personnel slapped with over 900 money laundering charges".

"Six personnel from gold investment company Genneva Malaysia Sdn Bhd and another company have been slapped with 926 charges of money laundering, making false statements and illegal deposit-taking involving RM5.5bil.

Genneva received the RM5.5bil from 35,000 depositors.

Its directors Datuk Philip Lim Jit Meng and Datuk Tan Liang Keat faced 246 and 226 counts of money laundering respectively; business advisers Datuk Ng Poh Weng (155), Datuk Marcus Yee Yuean Seng (17), Datuk Chin Wai Leong (23), and general manager Lim Kah Heng (16)."


The size of the amount (RM 5,500,000,000.00) the number of key people involved (six directors/managers and 35,000 depositors) and the charges (926) are simply breath taking. Why did it have to come so far, should the regulators not have ended this scheme a long time ago?

From Genneva's website: "Preserving Values, Leaving a Legacy".

Values are definitely not preserved (more like the opposite), but the company will definitely leave a legacy, although "somewhat" different from what its clients envisioned.


[4] SJ Asset Management; No recent news regarding SJ Asset Management or its manager Tan Whai Oon.

According to this website, Tan Whai Oon (on the left in the picture) looks like this these days:

He seems quite happy, probably more happy than his previous clients.

According to this article from The Star:

"Tan, also known as Jigme Phende, has been on the run since the end of June 2010 after his fund management company had run into trouble, the result of Tan being investigated initially by the Securities Commission (SC) for charging his clients high commissions.

The managing director and 70% shareholder of SJAM is rumoured to have gone into hiding in Nepal, and his last location was tracked to a monastery called Gyalwang Drukpa in Kathmandu, the country's capital."

Is there a extradition treaty between Nepal and Malaysia?

More shocking from the same article:

".... a senior finance executive of the company spilled the beans on the accounts that have apparently been cooked since 2001."

Why did it take almost 10 years before action was taken against the asset management company?

A simple search for "LinkedIn" and "SJ Asset Management Sdn Bhd" reveals many people who worked with this asset management company. Did nobody notice anything wrong? That is hard to believe. Could they not have dropped a hint at the Securities Commission, if needed anonymously?

Here is a link to a court case between CIMB Investment Bank (whose clients had invested in the SJAM managed fund) and Ernst & Young (the accounting firm who performed the audits on the accounts of SJAM). The document shows (paragraph 8) that CIMB compensated its clients, good for the clients, but not good for the shareholders of CIMB who have to fork the bill.


Enforcement is rare and slow in Malaysia, and if VIPs are involved (like in some of the above, directly or indirectly), things often seem to come to a complete stop. Hopefully we will soon get some much needed justice and transparency in the above cases. Not only against the perpetrators, but also to other people who have been sleeping on the job, like auditors, advisors, etc.

Why is Aussie VC fund much too late with its announcements?

I wrote before about Silverbird. It continues to lose money, with no updates about a possible financial rescue action. Not sure if it is wise to throw more good money after bad money, Silverbird has incurred horrific losses in the past.

The Edge Malaysia reported in its issue dated March 11, 2013 something else that is rather strange. CVC Limited (CVC), a Venture Capital fund from Sydney, announced that it had disposed of large amounts of shares in Silverbird and that it ceased to be a major shareholder. The announcements can be found here, here, here, here and here.

What is remarkable about this is that the announcements have been made almost one whole year too late. The first announcement was made on March 5, 2013 regarding disposals made on April 26, 2012.

There are very clear rules regarding major shareholders disposing shares: announcements have to be made within seven days to Bursa Malaysia. These rules are there for a very good reason, to inform all parties involved.

So why was CVC, a fund managed by financial professionals, who surely are very much aware of the listing rules, so much too late with their information?

It reminds me about an article of David Webb about US fund manager Denver Investment Advisors LLC acquiring a huge stake in Pico Far East Holdings Ltd (one of my favorite stocks) and informing the HKEX 13 months too late about it.

Webb wrote further:

"So Denver Investments has broken HK law. Will they be prosecuted? Almost certainly not, because this once again highlights that foreign shareholders cannot in practice be prosecuted for late disclosure unless they have a presence in Hong Kong, because a summons cannot be served against them outside HK without special permission from the HK courts, which is not lightly granted. See Order 11 of the Rules of the High Court. But Webb-site can name and shame them, and this we now do. A professional fund manager such as Denver Investments should know better and should check and comply with disclosure requirements when investing in overseas markets."

Fund managers, VC funds etc. from countries (US and Australia) with relatively high Corporate Governance standards are supposed to give the good example. In both cases, they seem to have done the opposite.

I hope the Malaysian authorities will shed more light on the Silverbird case, and, if rules are indeed broken, that they will make an effort to enforce the rules.

I am still stuck with one mystery: was no other party aware of what was going on? Did for instance the company secretary of Silver Bird know about the disposals? In the year report 2011 it is mentioned that the shares of CVC are held by "AmanahRaya Trustees Berhad, Exempt An for Perkasa Normandy Managers Sdn Bhd". Was AmanahRaya Trustees aware of what was happening?
It should be relatively easy for Bursa Malaysia to track changes in this account, and if not followed up by a corresponding announcement, to issue a timely query to the relevant parties? From a software point if view, it should be quite easy to generate a report of possible breaches of the listing rules.

Many questions, hopefully soon some relevant answers.

Silverbird, Masterskill, SEGi

Absolutely shocking announcement of the forensic accounting report by PKF Advisory regarding Silverbird, 12 key areas of financial irregularities:

- incorrect accounting entries
- masquerading of transfers
- fake sales
- invoices not available
- transactions can not be verified
- unrecorded receipts and payments
- documents being destroyed
- computer file deletion
- physical damage to the hard drive


Masterskill posted a quarterly loss of RM 2.9 million, very disappointing.


And finally some good news, Affin Investment Bank, independent adviser for the General Offer for SEGi shares, finds the offer not fair, not reasonable and advises to reject the offer. Yes, finally, the independent advisers are getting better in Malaysia. Although it was long overdue, it is good to see this positive change.

Silver Bird hammered by 300 million write-offs

When it rains, it pours.

One doesn't need to be a rocket scientist to predict that the write-offs would be huge for Silver Bird, but even then, the amount came way above expectattion.

From plus RM 213 million Shareholders' funds in one foul move to minus RM 83 million:

"Based on the financial position of the SBGB Group as at 29 February 2012, the Special Committee of SBGB also wishes to announce that subject to the approval of the relevant authorities, creditors and shareholders, the Group intends to seek the support of its bank lenders, major creditors and major shareholders to undertake a PCDRS. In this connection, the Special Committee of SBGB wishes to announce that Appendix 1 and the PCDRS will be or have been forwarded to the creditors and shareholders of the SBGB Group for discussion purposes.  The PCDRS essentially envisages a proposed capital reduction, a proposed rights issue, a proposed debt settlement which incorporates a cash repayment, the terming out of part of the liabilities, debt to equity conversion and waiver of debts that are no longer supported by assets, and the proposed liquidation of subsidiary companies that are no longer essential to the future operations of the SBGB Group."

I hope that will not turn into throwing good money after bad money.

Even before the huge write-off the company had already accumulated losses of RM 44 million, the total amount now is a stunning RM 344 million.

Announcements here, here and here.

Silverbird: I declare that the statements may be incorrect

Silverbird's 2011 annual report is out. The tone is set on page 5:

"These are trying times that have befallen the Group and it is unfortunate that the scourge of financial irregularities have crept into our fold. Many will be aware from the announcements by the Company that this year was marred by the recent discovery of financial irregularities that have cast severe doubts on the accuracy and reliability of the financial reporting of the Group, and which have led to some of the Company’s subsidiaries defaulting in their respective loan repayments and the Company being classified as an affected listed issuer under Practice Note 17 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad".

But then rather optimistically:

"I am pleased to inform that the preliminary findings indicate that the businesses would be profitable if properly managed".

A bold statement, given that Silver Bird has accumulated losses of RM 44 million and that is without taking into account of the financial irregularities, which can increase the losses further, probably substantial. "When it rains, it pours" is almost always true in these kind of cases.

No dividend is announced (no surprise there), but the Directors also make a gesture:

"In view of the crisis before the Company, the Board of Directors has resolved to put all directors’ fees for the financial year ending 31 October 2012 in abeyance pending completion of the on-going investigations into the financial irregularities".

Interesting statement comes later:

"I, Richard George Azlan Bin Abas, being an independent non-executive director of Silver Bird Group Berhad, who has taken primary responsibility for the financial management of Silver Bird Group Berhad, upon the suspension from work of the director and/or officer primarily responsible for the financial management of Silver Bird Group Berhad, do solemnly and sincerely declare that, to the best of my knowledge and belief, the financial statements set out on pages 36 to 90 may be incorrect, in light of the circumstances as highlighted in Note 47 to the financial statements and the Statement of Directors, and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act 1960".

In other words, the value of the report is very limited at best.

I hope that the investigation by PKF Advisory is finished soon with a healthy dose of transparency what exactly has happened.

Silver linings in the Silver Bird cloud?

The Star published on March 3, 2012 an article about Silver Bird, called: "Silver linings in the Silver Bird cloud".

The optimism from the writer, Errol Oh, stems from the fact that Silver Bird did announce its (otherwise horrific) results on time. But if the results were not announced on time, that would also have been a huge red flag.

And another assumption of Oh: "it may well be because the auditors are mindful of the fact that their work is subject to the scrutiny of the Audit Oversight Board (AOB)".

My guess at this moment is that Silver Bird simply ran out of money, and alarm bells started to go off, not really a surprise. Not sure if the AOB had anything to do with that.

Was there any red flag that investors, auditors or authorities might have foreseen that troubles at Silver Bird were brewing?

For the readers of Where is ze Moola's blog it should not have come as a surprise what has happened, the huge amount of  articles about Silver Bird were literally littered with red flags. But apparently they stayed unnoticed with many, including the authorities.

No matter how I look at what has happened, I don't see any silver lining at all, I only see very dark clouds for Silver Bird and its shareholders.