24.09.00
Pengurusan Danaharta Nasional Berhad's (Danaharta) statement of denial
of any
bailout in the Halim Saad's 3-billion ringgit loan scandal is misleading.
It
wholly misses the essence of the scandal.
In a press statement on 21st Sept, apparently in response to an
Asian Wall
Street Journal (AWSJ) article on 19th Sept, Danaharta denied there
was any
bailout of the lending banks or the borrower, Hottick Investment.
It further
claimed that Malaysian taxpayers only suffer a maximum loss of 4 ringgit
(Danaharta paid l ringgit to each of the 4 lending banks for taking
over the
loans).
On the surface, Danaharta seems correct, as it has not paid out any
money to the
lending banks or Hottick. But it misses completely the central
figure of the
scandal, Halim Saad, who is the real borrower of the 3-billion ringgit
loan. In
an intricate manoeuvre, Halim took over National Steel Corp of Philippines
(NS),
using Hottick Investment Ltd. of Hong Kong as the vehicle, whose main
registered
shareholder is Abdul Rashid Manaff, lawyer for Halim as well as for
the Renong
Group. With NS shares as the only collateral, the banks lent
out 3 billion
ringgit to Hottick to take over NS.
The vital question in this scandal is: Why have the lending banks sold
the
3-billion ringgit loans to Danaharta for a nominal 4 ringgit, instead
of taking
steps to recover the money from the real borrower and investor Halim
Saad, who
must have stood as a personal guarantor to these loans? The option
taken by the
banks is all the more puzzling when Halim happens to be one of the
most
prominent businessman in this Country. He is the controlling
shareholder of the
Renong Group, one of the largest and most powerful conglomerates in
Malaysia,
having some 10 listed companies under its umbrella.
Surely, Halim is worth billions, and is quite capable of repaying the
debts, at
least substantially if not fully. Why have the banks decided
to forego this
wonderful option for a hopeless one, which is recovery through Danaharta,
which
can do nothing other than selling the worthless NS shares? By
Danaharta's own
admission, "Hottick shareholders' investment is subject to a complete
write
off." By virtually writing off these loans when the option to
recover them
through the guarantors is still feasible, the management of these lending
banks
have committed an unforgivable crime, and have betrayed the interests
of their
shareholders. Which sane banker would have dared to do that?
To understand the intrigue of this scandal, one has to recognize two
facts.
ONE, these lending banks, Malayan Banking, Bank Bumiputra, RHB and
Commerce
Assets, are subject to direct or indirect Government control or influence,
through shareholdings and other connections. And in this Country,
the wishes of
the political masters can be interpreted as commands, as far as these
banks are
concerned. TWO, Halim Saad is no ordinary businessman.
He is generally
considered as proxy for the financial interests of the ruling leadership,
as
apparent from the fact that his Renong Group is usually given the first
preference to take on Government contracts and privatized projects.
And again
in this Country, it may not be surprising that he is recognized among
banking
circles as some one out of bounds to the pursuers of debts.
Under these circumstances, a simple political directive from the top
may be all
that was needed to persuade the banks to let Danaharta take over the
loans at a
nominal price in exchange for the privilege of writing off these bad
loans by
annual installments over a comfortably long period, as has happened.
(Incidentally, by what authority or under what legal basis were these
banks
allowed to write off the bad loans by instalments over a prolonged
period?)
As for Danaharta's claim that Malaysian taxpayers only loose 4 ringgit
in this
fiasco, this is totally false. By letting Halim off scot-free,
his 3 billion
losses is then transferred to these 4 banks, some of which are wholly
or
partially owned by the Malaysian Government (taxpayers).
Hence, the taxpayers
are shouldering a substantial amount of this 3 billion loss, and the
balance is
born by corporate and individual shareholders of the respective banks,
many of
whom are ordinary citizens.
The second part of this scandal is the questionable conduct under which
these
loans were given out in the first place. The net asset of National
Steel was
found to be only one quarter of the price paid for by Halim at the
time of take
over, as calculated from the data published by AWSJ. And with
NS' poor track
record of profits and difficult financial position then, NS should
have been
taken over at a discount, not at a whopping premium to its net asset,
if at all
any taking over this concern was considered wise.
The lending banks had therefore blundered in agreeing to accept the
grossly
over-valued NS shares as the only collateral, and in failing to evaluate
the
risks involved. But how could these banks have erred by such
big margin,
considering their formidable cumulative expertise in project evaluation
and
lending? And how could any banker be so daring and foolhardy
as to commit such
a huge sum on such precarious terms? The only plausible explanation
is the
hidden hand of politics again, considering Halim's closeness to the
center of
political power in this Country. This of course does not preclude
the
additional possibility of criminal improprieties on all parties concerned:
the
lenders, the borrowers and even the vendors (who sold the NS shares
to Halim),
in view of the strangeness of these transactions
Finally, after having said all the above, one wonders in the bizarre
world of
finance in this Country: is it remotely possible that Halim is not
a personal
guarantor to these loans? If the answer is affirmative, then
Halim is not
legally liable to repay these loans personally, but then this loan
scandal would
become even more explosive. You see, the lending banks had to
make up their
minds as to who the real investor was: Hottick the shell company, or
Abdul
Rashid Manaff the lawyer for Halim and Renonng, or Halim the businessman,
or
Renong the conglomerate. As it is inconceivable that the lending
banks had
failed to recognize Halim or Renong as the real investor, then the
motive of not
getting Halim to stand as a personal guarantor must have been to cater
for a
situation like what has just transpired: to let Halim off scot-free
when the
situation demanded. If this is not a grand collusion to defraud
the
shareholders of the lending banks, then what is? (applicable only in
the
eventuality that Halim is not a personal guarantor to these loans.)
As the Malaysian taxpayers and public investors are the real losers
in this
colossal scam, doesn't the Barisan Nasional Government owe the people
of this
Country a full explanation?
Kim Quek