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AWSJ: Malaysian Government Plans To Wrest Control of Renong
By Leslie Lopez
18/7/2001 9:14 pm Wed
[Nampaknya game sudah 'over' untuk Halim Saad yang dulunya begitu
dimanja. Tetapi ini semua silapmata belaka untuk mengabui mata. Jika
tidak pasti seseorang perlu didenda. Soalnya mengapa tiada?
The Asian Wall Street Journal
18th July 2001
Malaysian Government Plans
By LESLIE LOPEZ
Staff Reporter of THE WALL STREET JOURNAL
KUALA LUMPUR, Malaysia -- The Malaysian government is planning a
takeover bid that could wrest control of Renong Group away from its
controlling shareholder -- and signal a new tack toward handling the
country's bad-debt problem.
One of Malaysia's biggest conglomerates, Renong's businesses run banks
and toll roads, own oil and gas fields, and develop and build real
estate. it also is the country's biggest corporate debtor. but Renong,
the former investment arm of Prime Minister Mahathir Mohamad's ruling
party, has made slow progress in restructuring its 13 billion ringgit
($3.42 billion) of outstanding debt. And this is prompting the
government to take action.
According to senior financial executives and government officials
close to the plan, a government agency will announce a takeover plan
for United Engineers Malaysia Bhd., which owns a 32.6% stake in
Renong, as early as next week. As a result of Renong's convoluted and
complex equity structure, a successful takeover bid by the government
would result in businessman Halim Saad -- Renong's main shareholder
and executive chairman -- losing control of his business empire.
A change in ownership at the Renong Group would be the biggest
aftershock to date following the departure in June of Malaysia's
former finance minister, Tun Daim Zainuddin. Tun Daim, until recently
a close adviser and ally of Dr. Mahathir, and who also was considered
one of Tan Sri Halim's top benefactors.
Senior government officials close to the planned UEM takeover say the
exercise, which could cost the government as much as two billion
ringgit, was directed personally by Dr. Mahathir last week.
Azman Yahya, managing director of the government agency set up to
dispose of Malaysia's bad loans, Pengurusan Danaharta Nasional Bhd.,
will supervise the government's takeover bid, financial executives
say. Should the bid succeed, Datuk Azman is then expected to succeed
Tan Sri Halim and head the new management team in charge of Renong
Renong Bhd. and UEM are both publicly listed. In addition to UEM's
stake in Renong, Renong controls a 37.1% interest in UEM. Through a
complex shareholding structure, the two concerns control an additional
nine listed companies, which at one time represented the core business
investments of Dr. Mahathir's party, the United Malays National
Organization, or UNMO. Tan Sri Halim owns a 16.5% equity interest in
Renong and effectively controls the entire group.
Under Tun Daim's tenure as finance minister, several heavily indebted
companies with good political connections received state help, drawing
A government bid to take over UEM would appear not to be the same type
of state-backed bailout. The government expects a large number of
acceptances for its takeover offer will come from banks that hold UEM
shares as collateral for loans to Renong Group and from minority
shareholders of the company.
Moreover, removing Tan Sri Halim as head of Renong is intended to send
a message that politically well-connected companies and business
groups will no longer be afforded special treatment, and top
management will be punished for past excesses, government officials
Kuala Lumpur expects to accumulate at least 45% of UEM shares through
its bid, according to a senior financial executive familiar with the
plan. He added that the price offered will be slightly above market
value. Speculation of a possible bid stoked heavy trading in UEM
shares, which closed up 16% Tuesday at 3.56 ringgit apiece, a gain of
50 sen from Monday.
Heavy Debt Load
In mid-1997, when Asia fell into a deep financial crisis, Renong had
26 billion ringgit in debt, accounting for roughly 5% of total loans
in the Malaysian banking system at the time. Both Renong and UEM have
restructured a combined 8.4 billion ringgit in debt through the
issuance of seven-year bonds in early 1999. Renong also paid the
entire four billion ringgit in debt owed by another associate company,
Time Engineering Bhd., early this year with proceeds from the listing
of its wholly owned telecommunications subsidiary.
Complicating the Renong debt problem is a 3.2 billion ringgit personal
debt Tan Sri Halim owes to UEM. That debt to UEM is a result of a put
option Tan Sri Halim entered into in early 1998, which commits him to
purchase 32% of UEM's holdings in Renong. Partial payment of 100
million ringgit for the put option fell due last Saturday and Tan Sri
Halim was given a 60-day extension -- his second extension since
February -- by the UEM board to make good on his installment payment.
One government official involved in the UEM takeover plan says that
should the plan succeed, Renong, under the leadership of Danaharta's
Datuk Azman, would consider selling some of group's assets to retire
its debt. More complex, however, will be the settlement of the bonds
Renong issued, which the government official described as a "huge
Financial executives close to the UEM takeover plan say Dr. Mahathir
decided to enlist Danaharta's Datuk Azman because of the 37-year-old
former banker's strong track record at the asset-management company,
which has emerged as a prime mover in getting Malaysia's battered
banking system back on its feet.
Datuk Azman declined to comment.