The hottest business this week is the ‘Malaysia Airlines-AirAsia share swap’ deal. It got so many reactions despite the mainstream media playing the text-book perspective on how positive and progressive the ‘strategic alliance’ is. In the many criticism of the alternative media, The Malaysian Insider in its usual sinister agenda misled the focus of the issue away from the crux of the deal and how it would benefit Malaysia Airlines.
Suspiciously, looks like Kalimullah “Riong Kali” Hassan playing his cards to deflect the issue away.
The Malaysian Insider the past few days felt that it was important to highlight the current suit and counter suit between Danaharta and former Malaysia Airlines, TRI and Naluri Chairman Tan Sri Tajuddin. They were compelled to skew the on-going civil case, even to a point of false reporting and getting quotations meant to demonise a onetime power Malay business baron.
They even got quotations from the Opposition, to show the ruling party’s patronage on certain business personalities is still very much alive, just like former-abuse-of-power-convict Anwar “Mat King Leather” Ibrahim’s immediate charge against then Dato’ Seri Dr Mahathir Mohamad when the former was sacked as Deputy Prime Minister on 2 September 1998, ‘cronyism’.
The case was about complications of a business loan spinning into a very vicious cycle and eventually turned bad. A straight forward term loan was raised by Tajuddin as a ‘privatisation project to improve financial and profitability of Malaysia Airlines’. Aany also want to be believe that then he was asked to take over Malaysia Airlines from Bank Negara in 1994 for RM 1.792 billion. The taking-over of Malaysia Airlines shares from Bank Negara alone was a story which has a very interesting history to it.
The RM 1.792 billion was raised via a term loan syndicated through RHB Bank. The collateral of the loan then was 130 million of TRI shares, 309.6 million of Naluri shares and 45.2 million of Promet Langkawi shares.
Then came the Asian financial crisis of 1997/8. Business was bad and Tajuddin and his group was cash strapped. His loan defaulted. It became non-performing loan.
As an after math of the 1997/8 Asian Financial crisis, RM 90 billion worth of loans defaulted and became non performing loans (NPLs). Government of Malaysia set up Danaharta to take-over these NPLs from the financial institution so that they could move on. Instead, Danaharta would do its best to either supervise a recovery plan to for turn-around and make these NPLs productive or recover the most from these NPLs, which include liquidating it.
An extract of a Bank Negara presentation in 2005:
•Pengurusan Danaharta Nasional Berhad (“Danaharta”) was established by the Malaysian Government in June 1998 to address the non-performing loans (“NPLs”) problem plaguing the banking system during the Asian financial crisis.•The NPL resolution agency, euphemistically known as the national asset management company (“AMC”), was established as a pre-emptive measure to avert a failure in the banking system.•Danaharta’s objectives are:–to remove NPLs from the banking system to allow banks to concentrate on their core business of lending to viable borrowers (completed in March 2001)–to maximise recovery from its NPL portfolio (ongoing till 2005)
So, Danaharta took over these loans from the banks at 30sen from the nominal RM 1.00 value. After a series of discussion which involved the Government of Malaysia, Tajuddin entered into a Settlement Agreement with Danaharta on 8 October 2001.
Considering Danaharta took over the balance of Tajuddin’s loan amounting to RM 942 million for RM 300 million, it was agreed that the repayment tranche was broken into four:
- On or before 30 June 2002 RM 215 million
- On or before 30 June 2003 RM 215 million
- On or before 30 June 2004 RM 215 million
- On or before 30 June 2005 RM 297 million
It is further provided in the Settlement Agreement that any redemption of the shares could be made at a minimum redemption price of RM 1.30 per Naluri share and RM 3.50 per TRI share. On top of that, Danaharta took up Tajuddin’s entitlement of the TRI Rights Issue totalling RM 130 million. With the balance of the loan of acquisition of MAS amounting to RM 942 million, Tajuddin is required to pay back Danaharta RM 1 072 million (plus an additional TRI Rights Issue loan which was initially allowed by Danaharta amounting to RM 130 million).
Tajuddin tried to put a healthy footing back into TRI (at the time owns Celcom) with a Recapitalization Plan raising RM 3.5 billion before the deadline. He tried to borrow for the Rights Issue, of which could be used to settle Tranche No.1. However, Danaharta did not consent for that and Tajuddin defaulted the first tranche. In March 2002, Danaharta forced sale TRI to Telekom Malaysia for RM 2.75 per share which realised an amount of RM 717 million. The outstanding loan managed by Danaharta was reduced to RM 355 million.
Prior to the Recap Plan, Deutsche Telekom (DeTe) which is at the time a strategic partner (21% equity) of Celcom entered into an amended agreement which an exit clause was included. It provided DeTe a price of RM 7.00 per Celcom share if it was to be forced sold, which include an instruction by the Government. It means that if Celcom were to be valued at that price, TRI should have been sold for RM 1.825 billion.
Later on 30 August 2005, the Arbitral Tribunal of ICC found Celcom liable for breach of Amended and Restated Supplemental Agreement on 4 April 2002 inter alia between Celcom and DeTe. Celcom was liable to pay DeTe USD 177.2 million plus interests amounting to USD 16.2 million. That is equivalent of RM 740 million.
After the forced sale of TRI to TM, in December 2004 Danaharta then sold 32% control of Naluri to Atlan Holdings for RM 437 million. On top of that, 88.68 million shares(12.8%) of Naluri also were also disposed via the market which realised RM 70.95 million. In total, Danaharta realised RM 1.225 billion from all Tajuddin’s holdings in this super-garage sale. Not bad since Danaharta acquired this NPL from the banks at RM 300 million. In short, Danaharta realised a net earning of RM 935 million.
On top of all that realised from the garage sale, in the irony of things Danaharta decided to sue Tajuddin for RM 589 million. Considering that Danaharta was incorporated to assist businesses to recover and settle all its NPLs, hefty profits were made from this. Not only money was made in this. They decided to go for the kill with the suit. In return, Tajuddin counter sued the Malaysian Government. It was a defense mechanism.
The case has yet gone to hearing.
Table of Malaysia Airlines income statement through the years
Our blogging brother Another Brick in the Wall painstakingly did a thorough research on the Malaysia Airlines story, from Tajuddin taking in in 1994 till present, in six different parts: Part 1, Part 2,Part 3, Part 4, Part 5, Part 6 and the conclusion. All of these talks about “Loss accumulated to RM 8 billion” have been debunked by ABITW. And yet, the Oppositions and their friendly media ever so often perpetuate a lie.
Recently, Government decided to take this case against Tajuddin into a negotiation for an out of court settlement.
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