A Rebuttal of Danaharta's lies
Danaharta clarifies purchase of Hottick non-performing loan
It seems that lying to the Malaysian public by dishonest politicians has become a national pastime. Sometimes the lies are so transparent and blatant that the thought comes to mind whether these politicians consider the public stupid and easily lied to. This Danaharta statement is a classic case of lies, distortions and half-truths while ignoring the main issue at hand. Let us expose the lies.
Q: How much did Danaharta pay for the Hottick NPL?
A: For certain large loans, where fair value was difficult to determine at the point of acquisition, Danaharta would buy such loans for a nominal amount (say RM1) and undertake the resolution of such NPLs on behalf of selling financial institutions (FIs). The FIs would bear full risks of recovery and would be consulted in deciding the resolution strategies to be applied. The Hottick NPL was purchased under this approach and four FIs were paid RM1 each by Danaharta. Thus, any losses to be suffered by Danaharta (and taxpayers) would be limited to RM4.
LIES!! As the major share in the 4 banks is the government, the losses suffered by taxpayers will run into billions. The rest will be borned by the banks' shareholders while the borrower (Hottick and Halim Saad) gets off scott free.
Q: Were the banks bailed out by Danaharta?
A: No, the banks received RM4 in total. The gross value of the loan was RM3.1 billion, thus the banks concerned had to suffer a significant write-off in value. The arrangement did not pose a moral hazard to the banks.
Agreed! The banks were not bailed out. They were clobbered by Danaharta as selling the loans to Danaharta for a worthless amount means they could not pursue the borrower.
Q: Were the shareholders of Hottick bailed out by Danaharta?
A: No, their investment in Hottick is subject to a complete write-off. At present, NSC is facing a liquidation scenario that would obviously result in no returns for the shareholders.
LIES! LIES! and DAMN LIES! The shareholders of Hottick got off clean. Their losses came from their bank borrowings. As the banks cannot pursue them for payment they lost nothing.
Q: Was the NPL specially bought by Danaharta so that Hottick need not repay the loan promptly as the banks would have moved quickly to recover? Why did Danaharta acquire the NPL when it knew it was outside Malaysian jurisdiction? What was the benefit to the banks?
A: Danaharta made offers to all banks to buy all NPLs above RM5 million. It was up to banks to choose which NPLs they wanted to sell. Danaharta did not pick and choose. In so far as speed of resolution is concerned, the arrangement that was entered into between the banks and Danaharta in respect of the Hottick NPL called for the banks to bear full risks of recovery.
Are we stupid? Do we believe that the banks would sell the loan to Danaharta for RM1 knowing that Danaharta had no jurisdiction nor political will to pursue the loan? Any sane banker would have tried to recover the loan from the guarantor. The most likely explanation is that the banks were forced to sell to Danaharta.
This also meant that the banks concerned had a full say in the pace and manner in which the NPL was to be resolved.
Another lie! Once Danaharta took over the NPL, the banks have no legal recourse to recover the debt directly. The loan no long belongs to them.
At the point of acquisition, Danaharta was aware that it was outside Malaysian jurisdiction. However, it would still be able to pursue any legal course of action permitted under Philippine law - similar to any bank.
Talk is cheap. Let's see some action. Why not let the banks sue the guarantor Halim Saad in the Malaysian court instead of pulling that option from under their feet? Why protect Halim Saad at the expense of the banks' shareholders and taxpayers?
The main benefit of selling the NPL to Danaharta was that it relieved the selling banks of the distraction that managing NPLs posed to management. In fact, one of Danaharta's objectives is to remove enough NPLs from the banking system to allow it to go back to its primary function of providing funding to viable businesses and borrowers.
Stupid trivial reason. Recovering a huge loan gone bad should be a priority of the banks' management, not a distraction they are eager to cast off. We are talking about billions of ringgit here. Malaysians are again being taken for fools.
Q: What is Danaharta's stance on the NSC resolution efforts?
A: Danaharta made a press statement dated Aug 25 on this matter. It had requested that any workout proposal to restructure the NSC must follow the process of transparency and the underlying principle of competitive bidding, in line with international best practices.
Ptui! Words fail me.
Source: The Sun, 22 Spetember 2000