Editor’s Note: This is the second of a two-part article in an attempt to better comprehend the recent lawsuit filed by tycoon Tan Sri Halim Saad against twice former premier Tun Dr Mahathir Mohamad, former finance minister II Tan Sri Nor Mohamed Yakcop and the Malaysian government over Halim’s takeover of United Engineers Malaysia Bhd (IUEM) and Renong Bhd.
We ended the first part of these two-part series by throwing the question as to why “the people in power” or rather Dr Mahathir’s administration was so eager instead to control a fully restructured group like Renong-UEM? Is this supposed to be a rescue plan or a daylight robbery?
SO conglomerate Renong Bhd’s management was deemed sound under Tan Sri Halim Saad’s leadership going by the account of the plaintiff’s (Halim) reply to twice former premier Tun Dr Mahathir Mohamad’s statement of defence against the Malay tycoon’s lawsuit.
In so doing, the once dubbed Renong’s whizz kid rubbished the three defendants’ (Dr Mahathir, former finance minister II Tan Sri Nor Mohamed Yakcop and the Malaysian government) claim that the UEM-Renong Group of companies had caused the entire stock market to underperform in 2001.
On the contrary, Halim contended that the Renong group under his management was one of the most successful Bumiputera-owned groups prior to the government takeover.
“Out of the six Bumiputera-controlled companies in the top 30 listed companies (by market capitalisation) in 2001, half were controlled by me,” asserted Halim.
Debt level sustainable
The defendants highlighted that Renong had a debt totalling RM26 bil during the peak of the 1997 Asian Financial Crisis which constituted 7% of the entire banking system at the time.
Halim, however, argued that the debt level was manageable in spite of its large magnitude.
“Though Renong had large debts, the Corporate Debt Restructuring Committee (CDRC) had expressly indicated that the debt-restructuring could be carried out without any financial support from the government,” he countered.
The CDRC was set up by the government following the 1997 Asian Financial Crisis (AFC) to help companies work out feasible debt restructuring with their creditors without having to resort to legal proceedings.
“Further, the CDRC had stated it was confident that significant value could be extracted over the coming years from Renong’s asset portfolio,” stressed Halim.
At that time, Renong’s portfolio included Commerce Asset-Holding Bhd (now CIMB Group Holdings Bhd), Ho Hup Construction Bhd, Kinta Kellas Bhd, Cement Industries Malaysia Bhd, Pharmaniaga Bhd, Time Engineering Bhd, Time dotCom Bhd, ParkMay Bhd, Faber Bhd, Crest Petroleum Bhd, EPE Bhd and Intria Bhd.
Back then, all of these companies were listed on the stock exchange.
“Under the CDRC’s proposed scheme, Renong’s debt was ultimately resolved via the issuance of RM8.4 bil bonds by PLUS Expressways Bhd in September 1999 which were given an A3 rating from RAM Ratings,” he argued.
“This rating was maintained in November 2001 with PLUS having a net present value (NPV) cash flow of RM25 bil. These were indicative that PLUS was not in financial distress.”
Was Halim short-changed in TIME sale?
The TIME Group debt was a stand-alone debt and not part of the PLUS/PLUS SPV (special purpose vehicle) bonds. Thus, any failure would not have affected the group.
A few days after signing, Halim was told by the “people with the ISA power” again to abort the sale of 20% of Time DotCom Bhd to Singapore Telecom (Singtel) for RM1.67 bil, indicating that the total value of Time DotCom was RM8.34 bil.
Further, the 15% shareholding in Time DotCom was being offered for RM649 mil. In the end, Time DotCom had to accept an offer from sovereign wealth fund Khazanah Nasional Bhd for RM3.4 bil less.
From what Halim saw, neither Khazanah, Renong, UEM nor Time DotCom was interested in the offer. Khazanah already had Telekom Malaysia Bhd in its stable.
Halim personally did not like the offer because Khazanah lacked the relevant expertise and a partnership would not enhance the share price.
Had Time DotCom been sold to Singtel, Halim could have reduced the group’s debt significantly and further unlocked more potential for the telco as Singtel could have brought value to Time DotCom in terms of expertise and skills to grow its business.
Evidently, the Star Online reported on May 9, 2003 that Maxis Communications Bhd had formally completed its RM1.47 bil acquisition of mobile operator TimeCel Sdn Bhd from Time Dotcom – which is relatively very cheap compared to the price offered by Singtel.
Few years down the road, one Malay definitely did benefit from all these corporate manoeuvres as reported in the Annual Report of Maxis Bhd in 2022 – Tan Sri Mokhzani Mahathir who is currently the company’s chairman-cum-non-executive director,” teased a long-time stock market observer.
The telco’s Annual Report in 2009 also showed that the second son of Dr Mahathir was on the board. Could this just be a coincidence?
Looking back at all the corporate deals sealed during the reign of Dr Mahathir’s first premiership stint (1981-2003), one wondered why Dr Mahathir chose instead to help steel magnate Tan Sri William Cheng to delay restructuring plan of the Lion Group.
Why didn’t Dr Mahathir rush in to rescue the unstructured Lion Group like what he did to the Renong-UEM group? Lion Group had a debt of US$2.7 bil (RM10.1 bil) during the 1997 AFC.
In 2002, it was reported in Bloomberg that after a default in 1999, the Lion Group was the last big obstacle to Dr Mahathir’s goal of resolving Malaysia’s more than RM8 bil of overdue corporate debt. More than three years later, the Lion Group and its creditors still had not inked any debt repayment plan.
As of December 2005, the restructuring had not been completed. Interestingly, the Star Online ran the headline of ‘CDRC being kept alive for Lion Corp subsidiary’ whereby it was reported that CDRC has probably only got one client, namely Megasteel Sdn Bhd, the subsidiary of TS Wlliam Cheng’s Lion Industries Corp Bhd. – Nov 5, 2023
Abd Rahman Sidek is a FocusM reader.
The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia.
Main pic credit: Astro Awani