misc baiout

Call on government to put up a convincing case in Parliament next week that five bail-outs are not underway, three involving EPF bailing out UEM, Sime Bank and KUB, government bailing out Bank Bumiputra and Petronas bailing out Konsortium Perkapalan Bhd
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Media Statement
by Lim Kit Siang
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(Petaling Jaya, Saturday): Deputy Prime Minister and Finance Minister, Datuk Seri Anwar Ibrahim said in Kuala Trengganu yesterday that the Petronas, MISC and Konsortium Perkapalan deal was not a bailout and that the government has asked Petronas and MISC to engage an independent valuer to determine the price of the assets they intend to purchase from Konsortium Perkapalan Bhd. and its subsidiaries.

He said preferably they should engage a foreign valuer as this would help rebut insinuations by the foreign media and to eradicate any impression that the deal is to bail out Konsortium Perkapalan Bhd. which is headed by Prime Minister Datuk Seri Dr. Mahathir Mohamad’s son, Mirzan.

He said the assets, comprising 44 vessels for transporting liquefied natural gas (LNG), liquefied substance and dry commodities and bulk cargo as well as a controlling stake in Asia LNG Sdn Bhd and Asia LNG Transport Dua Sdn Bhd, should be valued at current market price to further avoid any allegation of manipulation. The government should put up a convincing case in Parliament next week that five bail-outs are not underway, three involving EPF bailing out UEM, Sime Bank and KUB, in the fourth case with the government bailing out Bank Bumiputra and fifthly, Petronas bailing out Konsortium Perkapalan Bhd.

Yesterday, Anwar also said that earlier skepticism of the decision by KUB Malaysia Bhd to divest its 30.01% stake in ailing Sime Bank Bhd. to purchase a 32 per cent stake in Malaysia Mining Corporation (MMC) from Permodalan Nasional Bhd alleging it was a bailout had been proven wrong and baseless once again as KUB made the purchase at RM2.50 per share which is actually higher than MMC’s last quoted price of RM2.30 per share.

Public dismay over the bailout of KUB cannot be so easily dispelled. It has been reported that KUB is likely to be involved in a share swap with Permodalan Nasional Bhd. over the acquisition of the 32 per cent stake in MMC for RM668.91 million.

Instead of paying the RM668.91 million in cash for the shares, KUB will pay PNB in the form of new shares in RHB Holdings Bhd. which Rashid Hussain Bank would issue to it for its 30.01 stake in Sime Bank.

If the whole KUB exercise is not a bailout, a proper and satisfactory explanation should be given as to why in the RHB buy-up of Sime Bank, KUB, which owns only 30 per cent of Sime Bank, would be getting RM670 million while Sime Darby gets only RM100 million for 60.35 per cent of Sime Bank.

It serves no purpose to blame the foreign media for regarding these corporate exercises as bail-outs, as they are also regarded by Malaysians as bailouts. What is important is to present a convincing case to all, local as well as foreigners, that the government has not reneged on its assurance that there would be no bail-out or corporate restructuring in its effort to restore confidence.

(21/3/98)

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*Lim Kit Siang - Malaysian Parliamentary Opposition Leader, Democratic Action Party Secretary-General & Member of Parliament for Tanjong

PETRONAS BAIL OUR MIZRAN MAHATHIR
by buying his 51% share of firm Konsortium Perkapalan Berhad which have a debt of RM 1.6 Billion!!!!

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Posted by FROM ALIRAN on March 05, 1999 at 11:26:39:

BAILOUT BLUES
State welfare for the rich and market capitalism for the poor
By Dr S Subrmaniam

Those of us who contibute to the Employees Provident Fund (EPF) are by now aware that the 6.7 per cent dividend credited for 1997
is the lowest in more than two decades. It is all the more disheartening to see this happen in a period when interest rates are rising.
One of the reasons given for this drop in the dividend is the sharply reduced income from EPF’s investments in the stock market. In
the last issue of Aliran Monthly, some of the questionable investments of EPF were highlighted. In this article, we want to discuss the larger ques tion of the use of funds from public and quasi-public institutions to bail out companies that are well connected to
important groups or individuals in the ruling party. In particular, we want to focus on the bailout of the Prime Minister’s eldest son,
Mirzan Mahathir, through the use of Petronas funds in the Petronas-MISC-KPB deal.

The Petronas-MISC-KPB Deal

In early March, cash-rich Petroliam Nasional Bhd (Petronas), wholly owned by the Ma lay sian government, announced two separate
but related transactions.

First, national shipping carrier Malaysian International Shipping Corporation Berhad (MISC), would acquire Petronas Tankers Sdn
Bhd, a wholly owned Petronas subsidiary that is involved in the transportation of liquified natural gas (LNG). MISC would pay for this
acquisiion by issuing new MISC shares to Petronas, raising the oil company’s stake in the shipper to more than 50 per cent from the current 29.3 per cent stake.

In the second and more controversial transaction, MISC would acquire the entire shipping assets of Konsortium Perkapalan Berhad (KPB), a debt-laden company that is 51 per cent owned by Mirzan. These assets include the Hong Kong-based Pacific Basin Bulk Shipping Ltd (a shipping company that KPB acquired for US$240 million in July 1996) and several LNG vessels held by KPB’s
wholly-owned subsidiary, PNSL Bhd. What is interesting is that, unlike the first acquisition above for which Petronas is to be paid in
the form of new MISC shares, in this case KPB is going to be paid in cash.

What this means is that by the end of both these transactions, Mirzan’s KPB would have virtually zero debt; now, KPB’s debt stands
at more than triple the value of its capital, or RM1.6 billion at the end of 1996. Meanwhile, Petronas, the government’s cash cow
would virtually own most of Malaysia’s shipping vessels through its controlling stake in MISC and would have paid a hefty sum for this dubious privilege. To ordinary Malaysians, this trans ac tion definitely appears to be a selective rescue or bailout of an ailing private company owned by the Prime Minister’s son using state funds. It is interesting to note that Petronas comes directly under the jurisdiction of the Prime Minister’s department.

Now imagine a situation in which a young entrepreuner (we will call him Ahmad) bought a shophouse in 1995 with a bank loan on the assumption that his business’ revenues would con tin ue expanding to enable him to repay the loan. Come the second half of 1997 and Ahmad’s business is badly hit by the economic crisis over which he has no control. The mortgage payment has been
increased due to higher interest rates while his sales and cashflow have slumped due to the economic slowdown. Ahmad is now
unable to pay his loan instalments.

What happens to him and thousands of other honest and hardworking Malaysians who took similar normal business risks based on a vision of Malaysia that was propagated for the past few years? Ahmad’s bank will eventually repossess his shophouse and auction it off to recover its loan to him; meanwhile, Ahmad will lose his entire savings and, in all likelihood, go bankrupt. No, Petronas is not going to come and bail him out. They are not going to buy over his shophouse in cash at a fair market value so that Ahmad ends up debt-free!

What’s the difference between Mirzan Mahathir and our imaginary entrepreuner Ahmad? The former, needless to say, is well
connected to the powers-that-be while the latter is not. Of course, Petronas and Mirzan have already denied that these transactions
amount to a bail out. But no amount of denial is going to hide the obvious. Does every Malaysian whose financial position has been
affected by the collapse of the stock market and ringgit get the same op por tu ni ty to liquidate their assets for cash as Mirzan’s KPB?

Let us step back for a moment and look at the larger issues. First, it is obvious that in this 150th anniversary year of Karl Marx’s
publication of the famous Communist Manifesto, the welfare state is strong and alive in Malaysia albeit in a unique format. Welfare here entails state aid for the rich, famous and well-connected while the rest of us Malaysians have to face the vagaries of the sacred “market forces”. In short, state welfare for the rich and mar ket capitalism for the poor!

Second, the gap between the words and deeds of many of our politicians and regulators is so big that it undermines all credibility. For example, the MISC-KPB deal was announced short ly after both the government economic advisor Daim Zainuddin and the Finance Min i ter Anwar Ibrahim pledged that the Malaysian government would not bailout troubled private firms. The Prime Minister made an even more ridiculous statement when he said all Malaysian busi ness men are his cronies. If that’s the case, then has he come to the rescue of all of them, both small and big regardless of political affiliation? How many businessmen from PAS have been rescued by government agencies? If this is how the government plans to re-instil confidence in the market, then we have a long way to go!

Third, Prime Minister and other government leaders have argued that if the government did not rescue these companies, they would
go bankrupt and close down, thus putting many employees out of work. This argument is not wholly true. If Mirzan’s KPB had not
been bailed out by government-owned Petronas and eventually went bankrupt, what would have happened? KPB’s haulage business would have been sold to a new owner or a rival firm - which would mean that KPB employees such as the drivers, mechanics, clerks and supervisors would keep their jobs. Only a small number of senior staff possibly including Mirzan, would lose their jobs! The
foreign shipping assets would also have been sold and employees in that subsidiary, who are mostly foreigners, would also have
continued their employment under new owners. Let us be clear: If a business operation is economically viable, it will carry on
regardless of who owns it and thus continue providing employment.

Fourth, another justification for government bailouts has been that it safeguards the bumiputras’ stake in the corporate sector. The recent controversy over non-bumiputra ty coons bailing out their bumiputra counterparts is a non-issue that diverts the attention of the ordinary public from the real issue: the use of public funds to save the rich and well con nect ed. Public funds should be used to help the poorer majority of Malaysians overcome the difficulties they are facing due to the recession. Instead, Petronas is using billions of ringgit to save the Prime Minister’s son while the government’s budget for basic needs such as healthcare and education is being cut.

The Bailout Business
Officials would rather call it something else
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WHEN IS A BAILOUT not really a bailout? When top officials say it is not. Former finance minister Daim Zainuddin, a close friend and associate of Prime Minister Mahathir Mohamad, says "a bailout is when state funds are used to rescue someone." No state funds have been used, nor will they, he promises. Anwar Ibrahim, Daim's successor in Finance and also the deputy PM, seems to feel the same way. He said March 16 that "the government's task is not to bail out individual companies, but to bring back confidence through consistent policies." Yet recent transactions to help businessmen in distress cannot be described as anything but bailouts. They may not have relied on state funds, but they have involved state-controlled agencies and regulatory bodies.
The biggest and most controversial deal so far is the apparent rescue of Mahathir's eldest son, the once fast-rising Mirzan, 39, and his floundering shipping empire. State oil corporation Petronas -- which the PM oversees -- announced on March 6 a complex deal for Mirzan's businesses. Petronas will buy out state-affiliated Malaysian International Shipping Corp., which in turn will purchase Mirzan's Hong Kong company, Pacific Basin Bulk Shipping, and part of his Kuala Lumpur-based Konsortium Perkapalan, which does shipping and haulage.

Petronas and MISC have not put a price on their acquisitions, but Mirzan already has said the deal will wipe out some $420 million in debts. Several cabinet members are alarmed by the transaction. "I thought such things could only happen in Indonesia or some African country," says an UMNO leader. Mirzan, for his part, told reporters: "I don't think it is a bailout. It's only a bailout if you say so."

Let's say so. The Mirzan bailout came just a day after the government announced that two large banks -- premier blue chip conglomerate Sime Darby's Sime Bank and state-owned Bank Bumiputra -- would need help. They suffered $600 million in losses from bad loans to well-connected corporations. The government is pumping $190 million into Bank Bumiputra (which has been rescued twice before with government funds, at a total cost of about $2 billion.) Meanwhile, Sime Bank was taken over by RHB Bank, part of stockbroker Rashid Hussain's growing financial services empire. For rescuing troubled Sime Bank, RHB Bank's holding company may receive a cash injection from the state-controlled Employees Provident Fund.

Another intriguing deal was United Engineers Malaysia's purchase of an additional stake in its beleaguered parent company, Renong, one of Malaysia's largest conglomerates with interests in construction, oil and gas, telecommunications, property development and finance. Though Renong is controlled by tycoon Halim Saad, many believe he holds those shares as a nominee for UMNO or its leaders -- which UMNO treasurer Daim denies. The deal was particularly controversial because UEM received a waiver from regulatory bodies that, in effect, shortchanged Renong's minority shareholders. Insiders say Finance Minister Anwar was out of the loop on this rescue, and perhaps on others too. So, who is calling the shots on the bailouts?

-- By Assif Shameen / Kuala Lumpur