Saturday, June 23, 2012

Tan Sri Syed Mokhtar's Empire Built on RM34.3 Billion Debt

In 1998, the Asian Financial crisis precipitated the collapse of UMNO crony company, Renong Bhd.  Renong which had debts in excess of RM20 billion, or approximately 7% of all loans in the banking system then, went bankrupt under the weight of its debt.  It caused hundreds of millions in losses to investors, the collapse of the stock market index and triggered a RM10 billion bailout of the company.  Renong was one of the largest and favoured conglomerates by the BN government with interests in highways (PLUS, UEM, Linkedua), rail (KTM, Putra LRT), property, telecommunications (TIME) and a whole host of other companies.

Fast forward 14 years later, we now have Tan Sri Syed Mokhtar Al-Bukhary’s group of companies which have a combined debt of RM34.3 billion or more than 10% of all local currency outstanding corporate bonds as at 2011.  These companies have an estimated total cash and cash equivalents of RM7.8 billion as at May 2012.

Hence the debt far exceeds that of Renong’s, causing genuine fears that a repeat of the crisis requiring monster bailouts with tax-payers’ funds.  This fear is especially real in the light of a global economic slowdown and a fallout from the Eurozone financial crisis.

Tan Sri Syed Mokhtar’s empire spans across scores of companies and industries, which are generally held under 4 listed entities.  The largest of them is the 51.8%-owned MMC Corporation Bhd whose group alone has outstanding debt of RM24.2 billion.  The key subsidiaries of MMC Corporation are Malakoff Corporation, Gas Malaysia, Aliran Ihsan Resources (water utility company), Port of Tanjong Pelepas, Johor Port, Senai Airport Terminal Services, SMART Tunnel and the MMC-Gamuda joint ventures.

His second largest entity is the 55.9%-owned DRB-Hicom Bhd which has debt of RM5.7 billion, inclusive of the most recent RM3.0 billion debt raised to acquire Proton Bhd.  The other companies of the group are Edaran Otomobil Nasional, MODENAS, Honda Malaysia, Bank Muamalat, PUSPAKOM, Alam Flora, POS Malaysia, Defence Technologies and several property development companies.

The third entity is 43.0%-owned Tradewinds (M) Bhd which has debt of RM3.48 billion.  It owns BERNAS which has a monopoly of rice purchase, import and distribution in Malaysia, Central Sugar Refinery and smaller stakes in Malaysian Sugar Manufacturing Bhd which together monopolises the Malaysian sugar market, and Tradewinds Plantations.

The final entity is 71.5%-owned Tradewinds Corporation Bhd which has debt of RM890 million. Tradewinds Corporation runs several major hotel chains in Malaysia, including Crowne Plaza Mutiara Kuala Lumpur, Hilton Kuching and Petaling Jaya and Hotel Istana.

Despite the expansiveness of his empire, and the load of his debt holdings, the Prime Ministers’ Department has just confirmed the privatisation of Penang Port to him.  With no details yet available, the acquisition will certainly require him to raise possible several billions of additional debt to fund the exercise.  What’s more, it has been widely rumoured that Tan Sri Syed Mokhtar is also leading the race to acquire Port Klang (Northport Holdings) as well as KTM Berhad.

The Government must explain the measures which are being taken to ensure that a repeat of the 1998 financial crisis will be avoided at all cost.  The Ministry of Finance must make available data on how much our financial institutions, statutory bodies such as the Employees Provident Fund (EPF), Civil Service Retirement Fund (KWAP), Tabung Haji Fund and Armed Forces Fund (LTAT). In addition, we call upon the Government to assure the Malaysian tax-payers that in the event of default, the rakyat’s monies will once again not be made to pay for the follies of Barisan Nasional cronies.


najib manukau said...

This is typical of an Umno made Malay, fortunately for the Malays he is NOT a Malay, he is a Syed a name that signifies that he is an Arab. All these Umno made Malays are claiming to be Malays in order to have the right, given by Umno to steal and rob the nation plus also to enjoy the privileges of that of a Malay.

Just like the grand son of the pariah from Kerala, the shenanigan Mahathir, he too is surely NOT a Malay, at best he is a mamak, but he adamantly claims to be a Malay. Why ? Unfortunately all that is legalised by the scumbags and parasites from Umno just so that these morons and shenanigans can continue to steal and rob without any questions being asked.
I wonder when are the Allah made Malays going to wake up and ask when is this illusion going to end ? Or the real Malay having problems getting a real Malay with the brain of a thief like shenanigan Mahathir amongst them, if ever they are able to find one.
A real muslim Malay has no family name, may be that was and still is the reason why , as described by shenanigan Mahathir in his book 'The Malay Dilemma" that a big problem with the Malay is the insect committed by them. just look around you some of these Umno made Malays have their family names from Arabia, Turkey and India. Even the royal family of Perlis who are from Arabia has a family name.
Therefore this Syed Mokthar is a real Malay but because of his wealth, it may have being built on huge debt, they brand him as a Malay.

Anonymous said...

Its a lot of debt and a crises will trigger a cash crunch. You look around and govt are printing money all over even the likes of China..Inevitably interest rate will rise. If interest rate rise slowly and steadily - a series of event rather than anything major, then it may not be a problem. But if its large effect, low probability event - and its possible - yes they will lose it all and bailout inevitable..

Anonymous said...

Malaysians have become an insufferable lot. How on earth can a person acquire so much without real money to back himself up and the mindless logic of the Msian Govt to continue to support & back him up? By the way, his name is 'Arab' & not what gives? Bumiputra, Umnoputra, Arabputra, Indoputra...anymore??

Anonymous said...

The patronage of the Malaysian Govt towards highly connected individuals is just unbelievable! You wont need foreign forces to sink the 'Bolehland' the Titanic, its own crew & Captain will do it!

Anonymous said...

It is sad. Clearly these types of companies are all vehicles to share the nations wealth with the elite political class. When they go broke, it will be our problem like General Motors in America.

If the government tries to money print this debt away when it hits, the Ringgit will fall and a nasi lemak will cost RM$20 :(

Anonymous said...

It's funny how you analyze financial statistics. Showing the debt of a company reveals nothing about it. You have to show the debt to equity ratio of the company to gauge it's financial strength. Or maybe show the debt to assets ratio. Heck, you could also show the cash flows. But no, you show nothing but large numbers that reveal absolutely nothing.

DAP can't wait to hit on Bumiputeras eh?


Cold eye said...

Dear Mr Adam,

I believe that you can obtain the financial statistic by the latest five years Annual Report in a row!

Do you know where is the money coming from for the bailout during the financial crisis! The answer is the Tax-Payer!

Why cronies corporate profit is belong to the major shareholder. However, the debt of corporate was shared by RAKYAT (tax-payers)!

The key point is .. like what Tony mentioned " The Government must explain the measures which are being taken to ensure that a repeat of the 1998 financial crisis will be avoided at all cost. "

lokgp said...

Adam is right.

Stating the debt alone is not enough.
We should consider the ability to service the debt by the coverage ratio of earnings to debt payment.

This is similar to a RM 320k debt, and you gave RM 72k in cash. AT 10% interest, that's RM 32k interest per year. So, without considering the rents you can get, you can service the interest for 2 years. This is still much more conservative than most home buyers. But, economy can crash and cause cash flow problems. But, right now, it looks pretty conservative to me.

Anonymous said...

cukup lah berkata2 tentang siapa sebenarnya melayu.kita pun tahu, proses percampuran melayu dan bangsa2 lain(cina, india, arab etx) sudah berlaku sejak sekian lama. Persaudaraan yg wujud antara beribu2 bangsa yg bercanpur dgn bangsa melayu bukan atas semangat kebangsaan, tetapi semangat Islam. cuma istilah pada zaman dulu, yg diguna utk menggambarkan muslimnya seseorang di semenanjung ada MELAYU. x wujud soal melayu mamak, melayu arab etc. jgn berfikir dgn pemikiran nasiobalisme yg sempit.

siapapun anda, bangsa apapun anda, hitam, kuning atau putih pun kulit anda, apabila anda menjadi muslim maka wujud serta nerta ikatan persaudaraan sesama Islam.

Anonymous said...

Firstly, all of the companies he took over were doing really good right now and keep on going strong. We should understand that most of the companies he took over were in big debt previously like doing a free national services to the government, turn out to rise back and catch people's eyes.

Businessman should be a businessman and i believe he got a really good business sense, apart of the charity he put into people.. The rest? Do they owned wealth by themself? Do they contribute back to the people? Don't be to harsh for something you see that might not fancy you.

Don't judge something based on numbers that you get out of paper without knowing all the efforts people put into it. Put it equally among the riches and you might wonder why he's one of the best businessman in Malaysia. People don't always understand what they see, because they just see what they want to see. Chill