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Bloomberg: Banks May be Forced To Cover NPL - FT: MRCB Chiefs or Mischief?
By John Burton
10/8/2001 9:26 pm Fri
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
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
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.''
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.
By John Burton in Singapore
Published: August 9 2001 16:59GMT
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
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
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
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.