[Kita siarkan temubual FEER dengan Halim Saad pada Disember lepas kerana apa yang berlaku sekarang sudah banyak tunggang langgang.
- Editor]

December 21, 2000

http://www.feer.com/misc/halim.html

Interview: Halim Saad

Halim Saad, chairman of Malaysia's Renong Group, spoke to REVIEW correspondent S. Jayasankaran in Kuala Lumpur on December 1. They discussed how Halim intended to make good on a three-year-old promise to buy a controversial block of Renong shares from United Engineers Malaysia. The deal, under a put option, is expected to cost 3.1 billion ringgit ($815 million). This conversation took place before the December 11 announcement that UEM, a Renong affiliate, had agreed to extend the payment deadline to May 2002 from February next year.

WILL YOU HONOUR THE PUT OPTION?

There is no getting out of it. If I don't do it, where am I going to hide my face?.

HOW? IT'S A HUGE AMOUNT. HAVE YOU LINED UP FINANCING?

Wait and see.

THE MARKETS WANT TO KNOW HOW. THIS HAS IMPORTANT IMPLICATIONS.

Of course, I know that. UEM made the decision to buy the Renong shares three years ago. I don't want to go into that except to say the shares weren't mine, they weren't my friends, and they weren't Umno's. [Umno is the politically dominant United Malays National Organization.] I don't take responsibility for the purchase, but I have agreed to take the burden off UEM. It's the honourable thing to do.

Now, if I don't honour the option, you people will scream corporate governance. On the other hand, if I tell you the banks have agreed to lend, you will shout cronyism and the banks will be sold down. I repeat, wait and see.

SOME ANALYSTS WORRY THAT YOU WANT TO TAKE RENONG PRIVATE TO AVOID THE PUT OPTION. COMMENT?

I can't do that. UEM could easily stop it by selling down its 32% Renong stake slowly, in batches to prevent a delisting. [Delisting occurs when the public holds less than 10% of a listed company.]

THE MARKETS HATED THE LATEST DEAL - UEM BUYING ALL RENONG'S ASSETS - AND SOLD DOWN BOTH COMPANIES. A BAD DEAL, WOULDN'T YOU SAY?

[The deal referred to was aimed at restructuring the Renong group's large debts.]

I thought the shares of both would go up. I wish you guys would read the fine print. UEM minorities won't be disadvantaged. When they do go into UEM, most of the assets will be debt-free. In fact, one of UEM's conditions for the deal is that it cannot suffer earnings or asset-value dilutions.

And please look at the underlying assets. One of them is 30 square miles of land just next to Singapore. It's value is 20% of the cost of land in Singapore. Don't you think there's value there?

We did it mainly to enhance Plus's valuation prior to listing. [Plus runs the highly profitable north-south highway and is owned 100% by UEM.] Its valuation is affected by two things - the project's loans and its bonds, raised to restructure group debt. Now the bonds? cash flows are secured against the Renong assets, not UEM's assets. So the valuers of Plus will have to provide for that risk and Plus's value will be lower. Now that the assets are owned by UEM, it can guarantee the risk and there is no need to provide. Plus will get a higher valuation on listing. The main reason for this exercise is to unlock value for Plus's listing.

ANALYSTS SAY THAT THE DEAL BENEFITS RENONG AT UEM'S EXPENSE. UEM CERTAINLY GETS SADDLED WITH MORE DEBT. COMMENT?

But UEM is already exposed to the debt through Plus. It can't get around that. So Renong's debt-free and it will ultimately own 54% of UEM. Big deal! If I were to take Renong private now, I would have to spend at least 5.3 billion ringgit, including the put option. And its only asset is a stake in UEM. Right now, the whole of UEM is capitalized at 3.2 billion ringgit. Does that make sense to you? Is it such a good deal for Renong? Or me? Listen, this is not to serve me, it's to serve UEM. Do you honestly think I would want to destroy companies that I built up?

WILL YOU TAKE RENONG PRIVATE?

It's tempting but too expensive. Let's face it, do you think anyone will finance me? And on what terms? It will cost me two arms and two legs.

THERE ARE SOME QUARTERS WHO CREDIT YOU WITH MORE VALUE DESTRUCTION IN THE STOCK EXCHANGE THAN ADDING VALUE. HOW DO YOU RESPOND?

When I first started out, UEM, my first company, was worth minus five million ringgit. At its peak, the group was worth 40 billion ringgit. Isn't that value creation?

WHAT DO YOU SAY TO THOSE WHO SAY THAT SINCE YOU ARE RESPONSIBLE FOR THE GROUP'S CONDITION NOW, YOU SHOULD PAY THE PRICE AND LEAVE?

I have faced [then Opposition Leader] Mr. Lim Kit Siang in five courts and I have no problems facing the cynics. But I built this group from scratch. Do you think I can leave so easily? Even if I caused these problems, then there is more reason for me to stay to clear it up. Before you start using words like "debt-laden," please look at the assets and the cash flows.

DON'T YOU THINK YOU HAVE AN ADVANTAGE, IN GOVERNMENT HELP?

Yes, I have been helped. My creditors have also helped. But at the same time, I am also making sure that our creditors get paid 100% with interest, and with no haircuts.

DO YOU CONCEDE THAT YOU EXPANDED RECKLESSLY WITH LONG-TERM PROJECTS FUNDED BY SHORT-TERM CAPITAL?

You're dead wrong. OK, we were supposed to list Time [a telecommunications company] in August 1997. The crisis scuppered that. There was supposed to be equal access [in the telcoms market] in 1996 but it got shifted to 1999. What I mean here is, Time would have been much better off if these things came about.

In 1997, Renong had debt of 2 billion ringgit odd against assets of 18 billion ringgit. By 1998, the exchange rates pushed debt up to 4.5 billion ringgit while our assets shrank to 4 billion ringgit. Short term borrowings? We had a six-year term loan and convertible bonds. We would have been fine if not for the plunge in security value.

HAVEN'T YOU MADE MISTAKES?

A lot! The biggest was taking our time to sell noncore assets in 1997. Sometimes, speed is better than waiting for the best return.

HOW DO YOU DEFEND POLITICAL CONNECTIONS, THE GOVERNMENT BUYING INTO TIME, FOR INSTANCE?

No amount of connections can help your share price without profits or performance. Look at MAS [Malaysia Airlines]. How come its shares aren't rising? If the government bought into Time, it did so for commercial reasons - and not for the love of Halim Saad.

YOUR LAST WORD?

I will pay my debts, Inshallah. And I will prove all of you wrong.