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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......
The Great Escapes
Halim Saad's complicated moves to save Renong may succeed yet, but the
damage is already done
By ARJUNA RANAWANA Kuala Lumpur
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
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
Malaysiastreet.com, 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
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?
'My Reputation Was At Stake'
Sometimes the way [stories are] written makes me out to be some sort
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"].
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
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.
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.
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.
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.
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.
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.
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
The Plan The Consequence
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
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.
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.
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