Local tycoon Syed Mokhtar AlBukhary’s RM34 billion in
liabilities has made him one of the country’s biggest holders of corporate
debt.
The debts have bankers and investors worried over the
potential stresses that big conglomerates, such as that of Syed Mokhtar’s,
which controls a varied range of businesses from power plants, to
transportation and infrastructure development, could have on the banking
system, a report in Singapore’s The Straits Times said today.
Syed Mokhtar’s business interests include DRB-Hicom’s Proton
Holdings Bhd, the latter which secured a RM1.5 billion soft loan from the
government in April this year. The government agreed to inject the funds by
subscribing to new preference shares in the local carmaker.
“Should Proton fail to repay the soft loan, the government
will be able to convert the shares and wrest control of Proton.
“The carmaker has bled more than RM2.5 billion since it was
taken over by DRB-Hicom four years ago, due to slumping sales, weak cash flows
and the high inventory levels of unsold cars,” said the report.
The newspaper also spoke to Jason Chong, chief investment
officer at Manulife Asset Management Services in KL, who said that from a
market standpoint, there was no reason for a private company to be bailed out
by the government.
Senior executives in Syed Mokhtar’s firms however,
downplayed debt concerns surrounding the group.
One officer from DRB-Hicom anonymously told the daily that
the “absolute numbers do look huge” but in reality, they were manageable.
“Many of our businesses require huge capital outlays and our
infrastructure projects are largely project-finance debts that are ring-fenced
by cash flows,” he said.
A senior officer of a state-controlled commercial bank also
said Syed Mokhtar was in a “far better situation” than a decade ago, and that
they were comfortable as lenders to the tycoon’s group.
Concerns however do remain over Syed Mokhtar’s debt burden,
said the report, as he was seen as a product of the corporate patronage system
that featured the intertwining of the business of politics, where politically
well-connected businessmen were favoured in the awarding of lucrative contracts
and concessions, it added.
In an economic model packed with “failures” and public
bailouts to protect the banking system, such as the takeovers of the Malaysia
Airlines and Port Klang Free Zone (PKFZ), “there are fears that Syed Mokhtar’s
group could face a similar fate should the Malaysian economy slip into a major
recession.”
Syed Mokhtar, who is listed as one of Malaysia’s top 10
richest people, has varied business interests, including strategic ports under
MMC Corp, independent power plants under Malakoff Berhad, as well as rice and
sugar processing and plantations, just to name a few.
Source –FMT-
Post a Comment