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08/08 20:19

Malaysia May Force Banks to Provide More to Cover Bad Loans

By J.S. Dhaliwall and T.H. Chan

Kuala Lumpur, Aug. 9 (Bloomberg) -- Malaysia may force banks to set aside more money for soured loans to the nation's most indebted companies if they can't come up with debt reorganization plans in three months, a banker involved in the talks said.

The Corporate Debt Restructuring Committee, a state debt mediator, is putting together guidelines to reduce the $8.7 billion in overdue debt at banks. The committee yesterday met banks and debtors to discuss new rules, said the banker, who attended the meeting. Officials of Malayan Banking Bhd., Southern Bank Bhd., Standard Chartered Plc. and HSBC Holdings Plc. were among lenders who attended.

``I view this development positively as it's in line with the government's new resolve to clean up all overdue debt,'' said Lim Beng Leong, head of research at Thong & Kay Hian Securities Sdn.

Higher loan loss provisions could crimp earnings at the nation's lenders already hurt by a slowing economy, which has cut demand for new credit and pushed bad loans higher. Last week, AMMB Holdings Bhd., the country's fifth largest lender, said first- quarter profit plunged by almost two-thirds as income from its investment banking, stockbroking and lending slumped.

The new guidelines may also force banks to write off some of the debt to hasten the reorganization.

The debt mediator, under its new Chairman Azman Yahya, is scheduled to meet with reporters and analysts today at 9.30 a.m. to unveil the ``new initiatives.''

The Debts

Debts being reorganized with the help of the debt mediator total more than 21 billion ringgit ($5.53 billion). They are owed by Lion group, Johor Corp. and two light rail companies run by Renong Bhd. and other investors.

Lenders currently set aside provisions for bad loans on a staggered basis. Under the new guidelines, they may have to put aside more money to cover those loans in full if they fail to work out debt reorganizations plans with companies in three months.

Last week, Prime Minister Mahathir Mohamad said banks should write off some debt to speed up efforts to clear overdue debt that has been a drag on the economy since the 1997 Asian crisis.

``It is important for corporates to also take a haircut too by either going for capital reduction or selling assets at current prices,'' said Nik Hassan Nik Amin, executive vice president at a unit of No. 2 lender Commerce Asset-Holding Bhd.

Financial Times

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Government to replace Malaysian Resources chiefs

By John Burton in Singapore

Published: August 9 2001 16:59GMT
Last Updated: August 9 2001 17:13GMT

Malaysia on Thursday said it would replace the management at Malaysian Resources (MRCB) in the second government-led restructuring of a big conglomerate in less than a month.

The management changes are also linked to the removal of businessmen associated with Daim Zainuddin, who suddenly resigned as finance minister in June after he was criticised for arranging corporate bailouts of politically-favoured companies.

Abdul Rahman Maidin, MRCB chairman and the main shareholder through a private company Realmild, will stay on as non-executive chairman but will have no role in daily management.

The reshuffle at MRCB, which follows the proposed state takeover of heavily indebted UEM-Renong, is seen as part of efforts by Mahathir Mohamad, prime minister, to speed corporate reforms and regain investor confidence.

Malaysia's Corporate Debt Restructuring Committee also said it would accelerate the restructuring of US$7.6bn of debts under its jurisdiction by applying stricter rules.

MRCB is one of several Malaysian groups with close ties to the government that are having problems servicing debts in the wake of 1997 Asian financial crisis because of slow progress in selling assets.

Abdullah Ahmad Badawi, deputy prime minister, said: "It will lead to greater transparency and good corporate government. There is a separation now between the owner of MRCB and professionals who will run MRCB."

Bernama, the Malaysian news agency, said two former consultants with Pengurusan Danaharta, the state debt restructuring agency, would manage MRCB.

The government appears to be tapping professional managers with good records in debt restructuring to manage both Renong and Malaysian Resources.

Analysts expect MRCB, which has debts of M$800m (US$211m), will sell its controlling stakes in two influential but unprofitable media companies, the pro-government New Straits Times Press (NSTP) group and broadcaster TV3.

State-owned Telekom Malaysia, the country's biggest phone operator, has been mentioned as a possible bidder for the media assets.

MRCB rose to prominence in the 1990s under the patronage of Anwar Ibrahim, the former deputy prime minister. After Mr Anwar was sacked in a political dispute, the group fell under the control of Mr Rahman, when he acquired Realmild in 1999.

It has been reported in Singapore that Realmildstill owes money to the Employees Provident Fund, the state pension fund, after it borrowed M$500m in 1997 to help finance its purchase of a 27 per cent stake in Rashid Hussain.

The publicity surrounding these claims may have forced the intervention in MRCB after unions protested the alleged misuse of EPF funds in politically-favoured deals. The EPF also has a 12 per cent stake in MRCB.