It was disclosed by former Transport Minister, Datuk Seri Ong Tee Keat that the Port Klang Authority (PKA) has continued to pay Kuala Dimensi Sdn Bhd (KDSB) bondholders despite the fact that PKA has filed RM1.6 billion worth of claims against KDSB for breaches of contract, particularly for making excessive, dubious and fraudulent claims, some of which was for works never commenced. The last payment made was in June and July last year totally RM733.3 million.
PKA insisted yesterday it had paid holders of bonds issued by Kuala Dimensi Sdn Bhd (KDSB) to avoid breach of contract in light of on-going legal cases in the Port Klang Free Zone (PKFZ) scandal.
The defence is an outright lie because there is no contract term which requires payment by PKA to KDSB or its bondholders if the necessary construction works are not completed. In fact it is the reverse, where a criminal breach of trust offence has been committed if PKA continued to make the relevant payments despite discovering that the works have not been executed or the claims were fraudulent!
It makes absolutely no sense for the Government to insist on making the payment when the Government itself disagrees that work has not been carried out. The only possible reason for the PKA and the Minister of Transport, Datuk Seri Kong Cho Ha to insist on making the payment is to protect KDSB. This is to ensure that KDSB does not get into financial trouble with its bondholders.
This is because, as part of the bond agreement's security arrangements, KDSB has issued two letters of undertaking. The first is for the construction, development and completion of the project on a turnkey basis; and the second, is to cover any shortfall in the amount payable by PKA vis-a-vis payment obligations under the bond after taking into account the credit balance in the Escrow Account.
KDSB has also granted a “Power of Attorney to [the bondholders] as security to ensure that the development works are completed pursuant to the terms and conditions of the agreements which can only be invoked and exercised by [the bondholders] upon KDSB having defaulted under the agreements.”
Based on the above letters and power of attorney, it basically means that should the Government fail to make payment for the project to the bondholders due to incomplete works, the bondholders will then demand from KDSB any shortfall in the amount payable by PKA, and on top of that undertake legal action against KDSB for failing to complete the project and for the bondholders to take over the development works of the project.
These actions will obviously mean substantial losses of profit by KDSB, a company owned by Barisan Nasional (BN) backbencher's chairman, Datuk Seri Tiong King Sing.
PKA’s claim also contradicts the advice from its legal advisors during the tenure of Datuk Lee Hwa Beng as its chairman who specifically advised withholding the payments to ensure maximum recoverability in the event of fraud proven.
Hence to avoid the above outcome, Datuk Seri Kong Cho Ha has chosen to instruct PKA to make the payments which are “due” despite the on-going dispute and litigation, to ensure that one of the biggest beneficiaries of BN patronage projects remains an on-going concern.
1 comment:
Can you disclose names of all the bondholders and shareholders if they are companies and how much at what interest rate they hold in bonds?
We can then see why Najib wants to bail them out.
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