Comprehensive Multiple Transportation Co. heading to bankruptcy without gov't support

AMMAN — The prospect of Comprehensive Multiple Transportation Co. (CMTC) continuing public transport operations depends on what the government provides in support for the company.

Chairman Saud Nuseirat told the shareholders during a recent general assembly meeting that besides the continuity of operations, government backing was essential to collect the company's dues from Greater Amman Municipality (GAM) and to settle amounts payable to creditors.

Nuseirat was responding to a question from the government representative who asked about the possibility of collecting the amounts required from GAM, the capability of CMTC to pay back the dues it owes and the likelihood that the company maintain its status as an ongoing concern in light of the company's latest financial results.

The chairman informed the shareholders about the discussions that the board of directors held in follow-up to secure the amounts owed to the company by GAM and the efforts exerted to collect the debt.

He said that renewing the trading of the company's shares on the Amman's Bourse was tied to what CMTC receives in support from the government.

According to Arab Professionals, the auditor which is a member of Grant Thornton, losses accumulated by the company until the end of March 2015 have reached JD29.2 million, noting that the loss in 2014 amounted to JD4.6 million. 

The consolidated interim financial statements as of March 31, 2015, showed a JD22.4 million outstanding bank debt, of which JD8.9 million is short term (less than one year), and JD13.5 million is long-term.

Other obligations include JD0.7 million instalments related to finance lease contracts, JD3.9 million dues to GAM and JD2.3 million provision related to lawsuits.   

"Accumulated losses exceeding 97 per cent of the company's JD30 million authorised and paid-up capital, and current liabilities greater than the current assets by JD14.5 million, indicate that the company is incapable to continue," the auditor wrote in a report.

The auditor said the Jordan Securities Commission and the Amman Bourse should be notified about the extent and causes of the losses as well as the work plan proposed to remedy the situation.

Arab Professionals revealed that several government bodies have slapped a lien on the company's assets in addition to a lien slapped by the Social Security Corporation (SSC) on the assets of the entity's subsidiaries: Asia Transportation and Investment Company, Al Tawfik Transportation and Investment Company and Al Dhilal Passengers Transportation Company.

Several accounts were qualified by the auditor for signs of impairment value, such as goodwill whose book was specified at JD11.3 million, and buses whose net book value was given at JD13.8 million. 

Impairment value was mentioned also in relation to JD1.9 million in  unfinished projects that are disputed in court against a contractor for not meeting the specifications required in the contract.

According to the auditor's review, JD12.4 million are doubtful assets owed by GAM to the company as financial support in accordance with an agreement signed between them. Against this balance, CMTC allocated JD7.6 million as provision at the end of March 31, 2015.

Arab Professionals said the company, also known by the brand name ABUS, did not take provisions to cover fines due to the SSC, interests legally due on the amounts that the company was judicially decreed to pay,  and JD3.6 million in interest related to delays on overdue and unsettled discounted bills between 2013 and 2015.

The company's profit and loss statement at the end of this year's first quarter showed a JD0.7 million operational loss which, after taking into consideration miscellaneous income, administrative expenses and financing costs, deepens the loss to JD1.1 million.

During the first quarter of last year, the operational loss amounted to JD1.1 million that deepened with other expenses to JD1.5 million loss.

Nuseirat indicated in the 2014 annual report that through several meetings held with parties concerned in the transport sector, besides the official correspondence to these bodies and the Prime Ministry, the board of directors was able to emphasise the company's dire need for operational financial support to cover the gap arising from set charges.  

"If the government and GAM do not buttress the company, its losses will exacerbate and accumulate leading to bankruptcy," the chairman wrote in a foreword, describing recent talks with the Economic Development Committee at the Prime Ministry on supporting the company as positive.  He explained that when the government bought a controlling stake in CMTC from Kuwait's City Group, besides a 10 per cent GAM equity, the company's losses were close to 100 per cent of equity.

He said that because of financial privation, the company did not settle up obligations to banks and creditors as well as JD1.6 million annually in bank interest, and was unable to repay the debt's principal amount.

Describing the fleet of buses as aged, Nuseirat alluded to technical problems in the Yutong vehicles, originally bought by City Group.

According to the annual report, CMTC's operations cover 92 public transport routes, mostly in GAM-administered areas where it runs 387 buses.

Additionally, ABUS runs 145 buses on other routes assigned to the Land Transport Regulatory Commission.

Among plans listed by the company for this year, after completing  a restructuring of the routes agreed upon in order to specify CMTC's needs of routes and buses, is to obtain permission to sell dilapidated buses and not to replace any of them. It is estimated that, in the first phase, 129 buses will be scrapped.

CMTC, whose workforce comprises 459 employees or 584 when workers at the subsidiaries are included, aims to develop 130 dunums at Schneller, a site near Hittin refugee camp on the Amman-Zarqa road, in a move to unify all the company's facilities in one location.

At present, CMTC conducts heavy maintenance at Ain Al Basha where its administration offices are also located.

Periodic and preventive maintenance takes place at North Marka where the warehouses are situated and the area is used as a parking garage for buses.

A rented location in Sahab serves as an area to stockpile idled buses.

Moreover, the company plans to re-examine contracts, especially those related to restructuring of unusable routes, and to operate 235 buses on 42 routes noting that the Customs Department has refused to exempt CMTC from fees on 75 Yutong buses imported from China, subsequently increasing indebtedness along with higher book value for the buses.

CMTC wants the government to form a neutral committee to re-examine the previous support contract with GAM and come out with a judgment, 

besides rescheduling the loans and credits to banks and creditors to the longest possible periods.

It also seeks better government control on roads in order to reduce traffic congestion, preserve space for bus stops, and prevent infringement on the routes where CMTC enjoys operational exclusivity.

"Higher prices of fuel and spare parts at a rate more than the increase in  bus fares as set by government parties is a main concern that puts the company at a disadvantage," the report said.

Although CMTC's capital investment amounted to JD29.8 million at the end of last year, the shareholders' equity stood at JD0.9 million because of accumulated losses.