FOCUS Malaysia has received an emailed letter from Khazanah Nasional Bhd’s lawyers Lee Hishammuddin Allen and Gledhill today, asking it not to publish articles based on confidential material which could jeopardise commercial dealings involving Malaysia Airlines Bhd.

Almost simultaneously, Khazanah issued a media statement over recent media articles by FocusM on the corporate exercise involving Malaysia Airlines.

“…we have requested for Focus Malaysia to stop publishing any information regarding the corporate exercise that would typically be considered confidential that comes into its possession.

“Focus Malaysia’s recent articles have negatively impacted the corporate exercise, and this has affected the potential for Malaysia Airlines to achieve sustainable growth and profitability.

“The articles have also undermined trust and confidence in our integrity as a professional corporate partner and harmed our reputation, consequently impairing our ability to undertake business transactions in the future,” the sovereign investment fund said in a statement on Feb 7. The statement contained identical paragraphs to some in the legal letter.

“Khazanah fully respects the principles of transparency and accountability, and the importance of press freedom and independence. However, these freedoms must be upheld together with some sense of responsibility and restraint by the press when it comes to a corporate entity conducting an on-going corporate exercise that is genuinely commercial in nature.

“The press has duties of confidence regarding any information that it uses and publishes for public circulation.”

The legal letter addressed to Focus Malaysia editor-in-chief P Gunasegaram and signed by Lee Hishammuddin partner Datuk Nitin Nadkarni, while requesting a stop to such articles, added that Khazanah reserves its rights “to commence proceedings against you for breach of confidence and to seek any other remedies as may be appropriate.”

It gave a deadline for “confirmation that you will comply with our client’s request by 11 February 2020 at 5.00pm.”

In an immediate response, Gunasegaram said the publication of the report was made in the public interest as detailed in an earlier article. He added that among key things highlighted which were of public interest was that Malaysia Airlines needed an injection of RM21.5 bil to stay solvent and turn around in five years.

Others include Khazanah having to bear costs of well over RM8 bil under a proposal for AirAsia Group Bhd to take it over and that Japan Airlines Co Ltd had a proposal to form an alliance via the injection of RM1.12 bil in return for a 25% stake in the airline.

“These are all matters of great public importance,” Gunasegaram said.

He added that the matter will be referred to the lawyers and an appropriate response will be made to Khazanah.

Khazanah had earlier on Jan 23 made a police report over a purported leak of board papers on Malaysia Airlines.

Business publication The Edge, citing sources, had said on Jan 24 that the sovereign wealth fund was “upset” and “shocked” over the matter, and lodged a report on the matter the day before (Jan 23).

FocusM has written a series of articles on the bids for Malaysia Airlines.

In a Jan 20 report, FocusM revealed that AirAsia appears to be in the lead to take over the beleaguered national carrier as Khazanah has been pushing for a merger between the two airlines although the move would result in high execution risks.

The other credible deal of the four proposals was from Japan Airlines which proposed an RM1.12 bil injection of funds for a 25% stake and a proposal for KLIA to become a hub for Japan Airlines.

FocusM later carried a story on how Japan Airlines plans to turn around Malaysia Airlines. The reports also highlighted that AirAsia’s proposed takeover of Malaysia Airlines will include key exclusions which may take the initial cost to Khazanah (which owns all of Malaysia Airlines) to over RM8 bil.

These include an RM5.4 bil financing gap for Malaysia Airlines’ six A380s, the exclusion of an RM2.5 bil sukuk, costs of staff layoffs, and the cost of cancellation of 25 Boeing 737 MAX 8 orders as well as other fleet rationalisation. All these total up to well over RM8 bil that Khazanah will have to bear even if Malaysia Airlines is acquired by AirAsia.

In another report, FocusM highlighted that Malaysia Airlines is expected to remain unprofitable and will require as much as RM21 bil of public funds to keep it running until 2025, if the languishing flag carrier fails to turn around its fortunes or find a strategic partner.

The report added that Khazanah’s figures indicated that even if Malaysia Airlines’ estimates were accepted, barring unforeseen circumstances, the fund still needed to pump in an additional RM10.3 bil to pay off the RM5.6 bil loan from special-purpose vehicle Turus Pesawat Sdn Bhd for six Airbus 380s and finance operations. – Feb 7, 2020

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