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AsiaWeek: The Great Escape
By Arjuna Ranawana

19/3/2001 10:38 am Mon

[Halim Saad masih hidup walaupun banyak syarikat yang dipegangnya sudah lingkup tetapi bank dan mahkamah bermurah hati membiarkan dia bebas untuk terus mengurus lagi. Dia membolot banyak projek yang tidak bersaing dengan sesiapa tetapi rugi juga. Berhutang berbilion-bilion sehingga sebuah bank menjadi tiada. Itupun sudah disuntik Petronas lebih sekali dua. Kali ini dana awam pula menjadi mangsa melalui pihak ketiga yang asyik membisu walaupun mulutnya ada.

Seseorang yang betul-betul pandai berniaga akan berjaya tanpa perlu dibantu sesiapa. Sebaliknya ia membantu negara dan rakyat dengan memberi perkhidmatan murah dan cekap sepanjang masa. Malangnya itu semua tidak ada pada kroni istimewa - yang ada cuma hutang yang perlu ditanggung semua sehingga terganggu simpanan hari tua kita. Bon Danaharta yang menyokongnya akan menjadi bom jangka yang memusnahkan ekonomi negara bila sampai tempohnya kerana tiada siapa yang waras berminat untuk memperolehinya. Dan tempoh itu tidaklah lama...... - Editor],8782,102622,

The Great Escapes

Halim Saad's complicated moves to save Renong may succeed yet, but the damage is already done


Halim Saad's office in downtown Kuala Lumpur befits that of a tech tycoon. Sparsely but stylishly furnished, the room features low, black leather chairs, a sofa and an uncluttered brushed-metal desk. Two computers, one with a liquid-crystal flat-screen monitor, hum quietly on a side table. Halim's well-cut, black double-breasted suit adds to the tastefully Spartan decor. The only spots of color come from his magenta-striped silk tie and a large wall map showing the extensive fiber-optic network of his high-tech venture, Time dotCom. The atmosphere is minimalist - but distinctly posh. "He wears Armani, Christian Dior and tailored Savile Row suits," says a former aide. "Everything about him is expensive."

Including the companies he runs. Halim, 47, is the executive chairman of Renong Group, the heavily indebted conglomerate to which Time dotCom belongs. In the past few years, his complex moves to keep Renong afloat have proved far costlier than his taste for bright designer neckties - at least for the minority shareholders of his companies. The tycoon's maneuvers include issuing bonds and rearranging assets and have often been afforded regulatory waivers from the authorities.

Halim's latest move is the listing of Time dotCom. The stated aim: to create a $2-billion telecommunications giant that would rank among the top ten in the local bourse. Left unsaid is that it would also raise funds to reduce Renong's debts. Time dotCom's initial public offering in February, 15 months in the making, was the largest ever in Malaysia. It was also a monumental flop: only 12% of the offered shares were picked up by the public.

The IPO may have looked like a financial debacle, but Halim has emerged unscathed, cash in hand. Once again, the country's leading Malay tycoon has bought himself enough time to plan his next move. Halim's saga reflects a deep-rooted Malaysian problem: the country's inability to wean itself off a system of mutual assistance in which troubled companies are kept afloat. Perhaps the greatest victim in all this: Malaysia's already tarnished image within the international investment community.

The Time dotCom saga is convoluted. The start-up was launched by Time Engineering, a telecommunications firm in which Renong holds a controlling stake. In 1998, Time Engineering ground to a halt, burdened by $1.18 billion in debts.> A Malaysian court gave the company a year to come up with a restructuring plan. With legal approval, Halim took an unlisted Time Engineering subsidiary called Time Telecommunications Holdings, renamed it Time dotCom and transferred to it the parent company's fiber-optic network, cellular-telephone and Internet-service-provider licenses, international-gateway license and payphone subsidiary. He also streamlined operations, changing 20 senior managers, and expanded the subscriber base from 400,000 to 1.6 million.

The listing of such a well-endowed company should have drawn swarms of investors. But there were few takers. Of the 571.7 million shares put up in the IPO, only about a quarter found "buyers" - and most of these were either employees or creditors. Just 68.6 million of the offered shares, or 12%, were subscribed to by independent investors.

The reason for the underwhelming response is simple: the IPO price was set too high. "The 3.30-ringgit offer price was fixed at a time when dotcom stocks were at a high a year ago," says Yeoh Keat Seng of, an online stock advisory. "Around the world these stocks have come down by 30% to 60%. Meanwhile, the composite index of the Kuala Lumpur Stock Exchange has declined by 30%." Investors were also wary of buying in to what is effectively an effort to reduce Time Engineering's debt. After the stock began trading on March 12, the price dropped 31% in the first three days.

The Time dotCom listing is indicative of how government and business interests often intertwine in Malaysia. According to a source close to the listing, some of the 10 banks underwriting the issue have made back-to-back arrangements with several government-controlled funds. The source says the shares are to be picked up at the offer price by the funds, which include the Employees Provident Fund and the Army Welfare Fund. Asked about this arrangement, Halim told Asiaweek: "I cannot comment on that." Officials at the Commerce International Merchant Bank, the lead underwriter, refused to either confirm or deny the deal. Asiaweek also contacted the funds themselves for comment, but none responded. Meanwhile, a spokeswoman for state asset-management company Danaharta says that it has agreed to accept Time dotCom shares at 3.30 ringgit as partial payment for the $100 million it is owed by Time Engineering.

The prospect of public money being used to buy up Time dotCom shares has outraged oppositionists. Lim Kit Siang of the Democratic Action Party argues that there are better uses for the money than propping up favored companies: "These moves are socially divisive, as they involve the use of government funds to save a few." The opposition intended to hold rallies to raise awareness of the issue, but fears of a government clampdown scuppered the plans.

Halim himself appears unfazed by all the fuss. He denies he is disappointed with the IPO undersubscription. That might have something to do with the fact that the underwritten IPO guarantees that Time Engineering will collect 100% of the funds regardless of whether the listing flops or not.

Halim's association with the government - specifically Prime Minister Mahathir Mohamad's United Malays National Organization (UMNO), the dominant party in the ruling coalition - dates back more than two decades. Born the eighth of nine children in rural Perlis state, Halim was a stellar student whose academic record got him into the elite Malay College at Kuala Kangsar. From there he went on to Victoria University in New Zealand on a scholarship. After qualifying as an accountant, Halim returned home in the late 1970s, joined Ford Motor and settled down with his bank-executive wife.

Halim's rise to fame and fortune began in 1980 when he moved to Peremba, a state-run property developer. He quickly became a protEgE of Finance Minister Daim Zainuddin, who headed Peremba at the time and was a confidant of then-deputy prime minister Mahathir. When Mahathir became prime minister the following year, Daim's star began to ascend - and so did Halim's. In his quest to build up Malaysia's industries and elevate the indigenous Malay community, Mahathir has consistently picked promising young Malays to run important concessions and projects. As part of that policy, Halim was tapped in 1985 to be CEO of an engineering firm called United Engineers (Malaysia), which was controlled by Hatibudi, an UMNO nominee company. Later, during a reorganization of UMNO's assets, Halim was made head of Renong, and UE(M) became part of the Renong empire.

The relationship between UMNO and Renong has always been a little hazy, but the latter is widely believed to be a strategic investment holding company for the party. Although UMNO today denies any links, at least some of its former assets have been held by Renong. Among those listed as wholly owned subsidiaries of the company are Hatibudi and Fleet Group, both of which were once directly connected to UMNO.

Whatever the precise nature of the relationship, Renong became an integral part of Mahathir's vision to build national and Malay pride through economic development. In Renong, Mahathir had an infrastructure giant capable of becoming a regional, even global, player. It employed some 40,000 people in 13 listed companies, with interests in everything from expressways and hotels to telecommunications and multimedia.

Still only in his 30s when he took over Renong, Halim became a tycoon almost overnight. He traveled frequently on two executive jets owned by the group and gave free trips to government ministers. He built an 11-room mansion in Bukit Tunku, a swank district in Kuala Lumpur where business bigwigs live. But as Halim became more successful, his marriage started to fail. In the mid-1990s, Halim and his wife had a messy and public split in which they squabbled loudly over their assets. They were divorced in 1998 after years of wrangling. Halim is now married to a Singaporean lawyer some 20 years his junior.

On the business front, Halim was eager to prove himself. "He was a manager driven with a vision," says the former aide. "He felt he was performing a national service. He would not say no to any project the government dreamed up." His first project was to have UE(M) build and operate the North-South Expressway (PLUS by its Malay initials), an 800-km toll road that runs from Thailand through Malaysia to Singapore. Construction began in 1988 and was completed in 1994, one year ahead of schedule.

The expressway, which became Malaysia's transportation backbone, proved to be a cash cow. Last year, toll revenues from highways, including PLUS, accounted for 90% of UE(M)'s $845-million earnings. With traffic levels on the rise, revenues are projected to increase by 16% this year. Given that UE(M) has the license to collect tolls on PLUS until 2018, the company's outlook should be bright.

The past few years, however, have seen UE(M)'s share price plummet from a high of nearly 24 ringgit in early 1997 to around 3 ringgit today. Reason: Renong, which has a controlling 38% stake in UE(M), has been using its cash-rich subsidiary to reduce the group's debts, which stood at $7.3 billion when restructuring efforts began three years ago.

UE(M) issued $2.2 billion worth of bonds, backed by PLUS's toll revenues, to pay down Renong's debt. Meanwhile, the government twice extended the toll-collection period for PLUS, settling on the current deadline of 2018. The net effect has been to give UE(M) more time to raise needed cash.

But what has really flabbergasted observers is UE(M)'s purchase of Renong shares for $692 million. In November 1997, UE(M) announced that it had bought a 32.6% stake at 3.24 ringgit per share. The acquisition, it said, would be financed with borrowings. Minority shareholders cried foul and demanded to know why the company was getting further into debt to buy stock it did not need. To placate them, Halim granted UE(M) a put option. This gave the company the right to force Halim to personally buy back the shares at the price that UE(M) paid, within a 12-month period beginning Feb. 15, 2000.

As this year's February deadline approached, Renong's share price was hovering at around 1 ringgit. Halim offered to fulfill his obligation, but the buy-back did not take place. Instead, UE(M) permitted him to postpone the settlement and just pay 100 million ringgit ($26 million) as a gesture of "goodwill." UE(M)'s share price tumbled further at the news. "There is no denying that the value of UE(M) has declined because of these various exercises," says Hoo Ke Ping of IQSB Management, a Kuala Lumpur-based investment consultancy. For his part, Halim insists that he will honor the put option.

In the meantime, Halim is looking to save money by retiring the PLUS bonds earlier than the due date of 2006. The funds to do so will partly come from the sale of Renong's loss-making PUTRA light-rail system in Kuala Lumpur to the government for around $1.57 billion. Halim has also said Renong will sell its 18% stake in Commerce Asset-Holding, which owns the newly merged Bumiputra-Commerce Bank. With these proceeds, he should be able to settle the bonds next year. After that, Halim plans to list PLUS and perhaps a few other toll roads, which is expected to raise the cash required to pay off the group's outstanding debt, estimated to be around $2 billion.

Halim's efforts to save Renong may succeed yet, but the damage is already done - certainly to Malaysia's image as an investment destination. "So what's new with Malaysia?" asks William Kaye, head of Hong Kong-based fund-management house Pacific Group. Since the regional financial crisis, he says, investors have been staying away from Malaysia because of concerns that their interests won't be served. "Fundamentally there is still a lack of transparency and proper corporate governance," he notes.

For all the controversy dogging Halim, his companies have played an important role in modernizing Malaysia. The PLUS highway has served to integrate the country as never before, while Time dotCom has the potential to create a telecommunications network needed to ensure Malaysia's success in the 21st century. At the same time though, critics charge that too many companies are kept afloat without regard for profit or efficiency. As they survey the financial fallout from the decline of once-proud Renong - and Halim's efforts to rescue it - Malaysians can fairly ask themselves: Was it worth it?,8782,102625,00.html

'My Reputation Was At Stake'

Sometimes the way [stories are] written makes me out to be some sort of crook

Renong chairman Halim Saad is famously difficult to pin down for an interview. But when he sat with Asiaweek's Arjuna Ranawana recently for 45 minutes in his downtown Kuala Lumpur headquarters, he was willing to entertain all questions. Here are excerpts:

You have said that Renong would become free of debt and one of the strongest companies in the region. Are you getting there?

We are not responsible for any non-performing loans. All of them are 100% serviced, and there has been no haircut [for the creditors]. There are exceptions such as PUTRA [the light-rail transit system in Kuala Lumpur], but that is being taken over by the government. We hope that within the next four years or so, Renong will be ['debt-free"].

What about complaints that your restructuring is being accomplished on the backs of minority shareholders?

I like to see happy shareholders. In many cases, minority shareholders have approved corporate decisions. When we issued bonds in 1997, UE(M) shareholders were given free UE(M) warrants [the right to purchase new shares before they are offered publicly]. They were worth 6 ringgit each ($2.14) at the time. Now, they are worth 1.50 ringgit [39 cents] but because the warrants were free, they [are still worth something]. The minority shareholders also got 1,024 acres of land [near Singapore]. It is unfair to say that minority shareholders have suffered.

There are concerns that you will not honor the put option you granted to UE(M), which guaranteed you would make up any loss in the company's 1997 purchase of Renong stock.

I have paid ($26 million). I would not have paid that if I had no intention of honoring [the put option]. I could have defaulted, but I am not like that. I have every intention of honoring it.

You have paid what seems to be only the interest.

Yes. But I have every intention of honoring the put option.

Renong used to be a favorite of foreign investors, but now it seems to have lost favor. Investment houses are not even following the stock. Why not?

Because of what [foreign reporters like you] have written. Sometimes the way [stories are] written makes me out to be some sort of a crook.

But you have really not been hurt by your companies' losses.

What losses? I was not in Time Engineering when it had problems. Why should I be punished? Am I rewarded when the stock price goes up? Then I should have been paid 10% of 8.3 billion ringgit ($2.1 billion) when prices were okay.

How will Renong and UE(M) investors react when you list PLUS later this year?

Anybody who bought shares of Renong and UE(M) should have known that we were eventually planning to list PLUS. We had said we were listing Time dotCom also. We had permission to list Time dotCom in 1997, but we didn't do it because of the crisis. No one can say they are surprised by the listing of PLUS.

You have spent a lot of time at Time dotCom recently.

Fourteen months, because, although I am not directly responsible for [the bankruptcy] at Time Engineering, I felt it was important for me. My reputation was at stake.

You have often been described as a proxy for the powers-that-be and one of the most trusted of trustees of UMNO. Is that accurate?

What I can say is, "thank you very much." At least somebody trusts me, and that speaks for my integrity. But it is not true. The prime minister has denied this in Parliament and the treasurer of UMNO [Finance Minister Daim Zainuddin] has denied it.


Rocky Road to Health

Multiple efforts to boost Renong have so far been unsuccessful

Halim Saad would be the first to acknowledge how hard it is to rejuvenate a heavily indebted company with a depressed stock price. Multiple efforts to boost his flagship company, Renong, have so far been unsuccessful

The Plan The Consequence

November 1997

United Engineers (Malaysia) props up the Renong stock by buying one-third of its parent market. Halim later gurantees that he will repurchase the shares at the original price UE(M) paid by Feb. 15 this year.

Both UE(M) and Renong have been hurt. UE(M) borrowed heavily on top of an already high debt load to buy Renong shares. Rating Agency Malaysia cut UE(M)'s credit worthiness in early 1998. And after the stock purchases were revealed, the UE(M) share price continued a plunge from 24 ringgit a share ($9.64) in early 1997 to about 3 ringgit (79 cents) today. Renong, once a favorite of foreign investors and robust infrastructure builder, has been shunned.

September 1999

UE(M) and Renong issue $2.2 billion worth of seven-year zero-coupon bonds attached to Malaysia's North-South Expressway (PLUS).

Proceeds pay $1.4 billion in Renong debt and $790 million of UE(M) debt. However, the weight of the PLUS bonds along with the weak performance of the Time dotCom IPO may cause Halim to reconsider plans to split off and list PLUS separately, which he had said would happen by 2002.

February 2001

Renong subsidiary Time Engineering launches the long-anticipated initial public offering of its new-economy stalking horse, Time dotCom. Almost three-fourths of the IPO's $500 million in proceeds will pay Time Engineering debt.

The IPO bombs. The price, ringgit (87 cents) a share, was established at the height of a technology stock bubble in early 2000 but never revised after tech stocks tumbled. At that price, demand is anemic and the listing is 75% undersubscribed. However, a consortium of 10 Malaysian banks underwrite the IPO, and both Time Engineering and Time dotCom get their money. The stock closed March 14 at 2.27 ringgit, down 31% from the opening.

Sometime in 2002?

Renong expects to sell its PUTRA light-rail commuter line to the government. It will recoup the nearly $400 million it sunk into the project and get an operating contract to run the line.

Given that PUTRA lost $22.6 million in the first three quarters of the last full fiscal year and has defaulted on its construction loan multiple times, most recently this month, the government's purchase will certainly help Renong. And PUTRA's parent should be able to do better with an operating contract than it did as owner of the loss-making line.