Halim Saad’s revelation: NMY’s gambit

NMY: The Godfather of organised GLC corporate crap

Former UEM and Renong Supremo Tan Sri Halim Saad revealed that he was denied the option to MBO and taking it private by then Economic Adviser to Government Tan Sri Nor Mohamed Yackop. Instead Nor Mohamed induced Halim to leave the board of both companies, sold his holdings of and eventually both company were acquired by Khazanah Holdings Bhd.

NST’s interview with Halim:

Tan Sri Halim Saad Speaks Up: Gross Injustice Done to Me

If I was not forced out, and were given a free hand to manage the group, I would have been able to take advantage of the subsequent improvement in the economic conditions to list PLUS, realise the full potential of the Nusajaya land bank and grow the overall assets and business of the Renong/UEM Group.

Q: Some of the strongest criticisms against you have been on the purchase by UEM of Renong shares after the 1997 Asian financial crisis and the following put and call option attached to the sale.

A: There have been certain false statements made against me relating to my put and call option on the Renong shares purchased earlier by UEM. Some went on to say that the subsequent cancellation of the put option by UEM was a bailout of me. I feel the need to correct the misstatements made and shed light on the actual events that took place at the time.

Following the 1997 Asian financial crisis, UEM undertook the purchase of a 32.6 per cent interest in Renong Bhd (its parent company) in the open market. These shares were not purchased from me or parties related to me.

To appease the minority shareholders, Datuk Seri Anwar Ibrahim, then the Minister of Finance and I agreed that I buy the shares for RM3.2 billion from UEM by way of a put option, although I was under no obligation to do so. I also had to pay a deposit of RM100 million.

At the UEM Extraordinary Meeting held on February 14, 1998 to ratify the acquisition of the 32.6 per cent interest in Renong, 85 per cent of UEM shareholders voted in favour.

Q: What steps did you take to fulfil the put option?

A: Going forward, I had the option of honouring the put option amounting to RM3.2 billion or making a general offer (GO) for all of UEM, which would have made UEM wholly owned by me and the put option would have extinguished by itself. The GO would have been undertaken at a price which would have been fair and satisfactory to all shareholders of UEM.

A Singapore-based investment bank was willing to fund the GO or put option. In view of the introduction of capital controls in September 1998, I sought the assurance of Bank Negara that the money required to fund the exercise could be brought in and taken out of the country at a later date.

Later, at a meeting with Tan Sri Nor Mohamed Yakcop, who was then the Economic  Adviser to the government, he said: “In no uncertain terms are you to continue with your proposed GO (to take over UEM or Renong) or proceed with the put option (placed on you by UEM).”

This and subsequent actions by the government forced me to sell off the group to Khazanah Nasional. A takeover by the government or Khazanah would not have succeeded if I had not given my support. I did confirm my support by way of a letter.

Q: You consequently left the Renong and UEM board late in 2001 following the takeover of Renong/UEM by Khazanah Nasional. Do you think that the takeover was necessary?

A: I left the Renong/UEM Board on October 3, 2001. Among the reasons put forward by the authorities for the Khazanah takeover of Renong/UEM Group were to prevent a systemic risk to the banking system in Malaysia and to enable a sustained restructuring of the group. This statement was in my opinion unjustified for the following reasons:

1) Renong/UEM was not in a situation where it required a bailout. There was never any bailout. Some writers and analysts have got it wrong. The bonds issued by PLUS/UEM/Renong in 1999 were A-rated and were adequately secured by the group’s internal assets and PLUS (Projek Lebuhraya Utara-Selatan Berhad) cash-flows. Furthermore, they were only due for redemption in mid-2006 and the rating was never downgraded. As such, there was no question of a systemic risk to the banking system in Malaysia.

2) The Renong/UEM Group was fully restructured by mid-2001, except for Putra (running light rail transit line), which was a standalone debt, and the group’s prized assets were PLUS, the Nusajaya land-bank and Time DotCom.

3) Most of the debts were project financing and infrastructure-based, where it is common to have a debt-to-equity ratio of 80:20.

During my tenure, the Group companies paid all their debts in full (principal and interest), without being granted any haircuts.  Taking into account the size of the group and the extent of its borrowings, no other company listed in Bursa Malaysia can boast of a similar track record.

4) Nine months after I left Renong/UEM, PLUS was listed on the then KLSE (Kuala Lumpur Stock Exchange), thereby proving that PLUS was ready for listing during my tenure. I had not rushed it because we had up to the year 2006 when the PLUS bonds were due for redemption and we would have gotten better valuation for the shares.

5) As part of Time DotCom’s restructuring, Singtel (the Singapore-based telecommunication service provider) offered RM2.1 billion for a 20 per cent interest in Time DotCom and 108.2 million shares in Time Engineering Bhd.

Singtel valued Time DotCom at around RM8 billion. Moreover, Singtel would have brought value in terms of expertise and skills to grow the business of Time DotCom. At the last minute, I was stopped from proceeding with the Singtel deal and because of time constraints I was forced to accept the less attractive alternative.

Based on the facts I have mentioned, it is clear that I have always had the intention and the ability to honour the call and put option, or alternatively undertake the GO for UEM. Furthermore, despite the Asian financial crisis of 1997, the Renong/UEM group was substantially restructured at the time of my forced departure.

In summary, a gross injustice has been done to me especially when I was denied or stopped from making the payment of RM3.2 billion for the UEM put option/GO and proceeding with Singtel on the RM2.1 billion deal, both of which would have substantially reduced the Group debt of some RM20 billion, most of which were project-related anyway.

Some other companies, like the Lion Group/Amsteel (with RM15 billion in group assets), whose RM10.2 billion debt was mainly neither project-related nor cash flow-based, were not touched and instead given preferential treatment, like exemption from burdensome import duties and granted Approved Permits.

If I was not forced out, and were given a free hand to manage the group, I would have been able to take advantage of the subsequent improvement in the economic conditions to list PLUS, realise the full potential of the Nusajaya land bank and grow the overall assets and business of the Renong/UEM Group.

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The revelation is landmark because how UEM and Renong changed hands were not clear to many. Nor Mohamed is the architect and master planner of Khazanah in its form, function and clout what it is today.

Nor Mohamed wiggled his way from an Economic Adviser to an ‘Economic Controller’. He manipulated his position as Economic Adviser to the Government to subtly build his ’empire’. The power was not about his holdings through these corporate exercises but lies in the strategic position and plays that were enabled from the corporate gambits. Nor Mohamed via his stream of professional managers entrenched in the conglomerates and corporations is now the Economic and Corporate Baron of Malaysia.

Young and ambitious chartered accountants with relevant investment and merchant banking experience and exposure and public auditing were rounded up, selected and nurtured to take over the management of a stream of conglomerates and corporations owned by the Malaysian Government (later to be dubbed as GLCs, a term borrowed from the Singaporeans). Khazanah emulated Temasek Holdings, in form, structure, philosophy and holdings management.

Personalities like Che Khalib Mohd. Noh, Abdul Wahid Omar, Ismee Ismail, Abdul Rahmad Ahmad, Shahril Reza and Mohd. Bakke Mohd. Salleh were lined up along with Khazanah Supremos Azman Mokhtar and Mohamed Zainal Shaari to carefully planned and execute the consolidation of these GLCs and the restructuring and rationalisation of the capital, assets and debts. These are known as “Nor Mohamed Yackop’s Boys”, a term coined by in 2001. Then the Malaysian corporate scene saw the rotation of these professional managers around.

Unfortunately for the last 18 months, Nor Mohamed is an integral part of PM Dato' Seri Najib's PMO

During PM ‘Flip-Flop’ Dato’ Seri Abdullah Ahmad Badawi’s time, Federal Government macro planning and measurement of implementation traditionally carried out by agencies like EPU and ICU is now being taken over by ‘Level Four Boys’ and Nor Mohamed, in his capacity as the Second Finance Minister. The re-writing of the role, strategy and operations GLCs under Khazanah saw how corporations which were born from corporatisation and privatisation of Government services and operations shifted from ‘servicing the country and rakyat’ to focus on ‘Return of Investments’ (ROI)’, ‘market capitalisation’ and most of all, ‘value proposition’.

GLCs suddenly embraced capitalism to the core instead fulfilling its role as catalyst to the economy and nation-building agenda such as custodian to socio-economic development and transformation programs. GLCs no longer interested to deliver programs for the sake of the rakyat and spur growth.

The philosophy of corporation of services rendered and undertaken by Federal Government agencies is about to make it efficient, sustainable with the right strategies, processes and plans and commercially viable to raise its own funds to expand and serve the nation and be an integral part of nation building. Instead all these corporatised Federal Government agencies are now being given the objective of making money.

EBITDA was the instruction and objectives. CEOs’ key performance index (KPI) is measured by this. CEO is expected to display entrepreneur-ism and make profits of originally products and services meant for the rakyat and tanahair.

The nucleus of all these activities is Nor Mohamed. Later starting from 2006 he went to introduce economic corridors such as Iskandar Development Region (later to be known as Iskandar Malaysia), Nothern Corridor Economic Region (NCER) and Eastern Corridor Economic Region (ECER) where GLCs such as Khazanah, Sime Darby and Petronas respectively were ‘sucked’ into fulfilling these very expensive wet dreams.

The face so many wanted to see no longer in Government

Nor Mohamed also was instrumental on Federal Government spending of big monies on consultancy advice from firms such as Bina Fikir, Ethos and foreign firms for policies, strategies, blue prints, ‘rebranding’, ‘Wide Asset Unbundling’ and even operational programs. Telekom Malaysia’s operational issues were brought to McKinsey to be resolved. The National Automotive Policy introduced almost saw the slow demise of national car project Proton.

Till present day, no one knows who acquired Gevi SpA the brand owner MV Agusta from Proton for Euro one only back in end 2005. Husqavarna was hived off to BMW in 2007 for a substantial sum of money.

Corporate scandals such as the selling out of Avenue Capital to ECM Libra in 2006 and Parkway were under the watch of Nor Mohamed. A lot of bonds were arranged and issued by GLCs such as Telekom Malaysia and TNB during Nor Mohamed’s ‘reign of terror’ as the Second Finance Minister. He had an almost free range of authority and power restructure and strengthen the ‘NMY Empire’ since the Prime Minister and First Finance Minister PM ‘Flip-Flop’ Abdullah was incompetent and completely oblivion of the whole workings.

CIMB as it is presently was restructured from Commerce Asset Holdings Bhd. during Nor Mohamed’s ‘reign of terror’. Later it became part of Khazanah. CIMB’s most notable corporate advisory was the merger of plantations based conglomerates  Sime Darby, Guthrie and Golden Hope arranged by Synergy Drive Sdn. Bhd., which was completed in late 2007.

Whether or not it was the right thing to do to deny Halim of the MBO of Renong and UEM based on his proposal can only be determined through time. What is important is that Nor Mohamed manipulated the circumstances to build the ‘NMY Empire’ via Khazanah and now Malaysians are paying for that. For all intent and purpose, Halim delivered. North South Highway, Bukit Jalil Stadium Complex, Putra LRT are projects that Halim initiated. What Nor Mohamed achieved from his corporate plays never did benefit Malaysians.

CIMB Adviser Tan Sri Mohd. Nor Yusof, NEAC member Tan Sri Andrew Sheng, NMY and Khazanah Supremo Tan Sri Azman Mokhtar

Khazanah is not an example of a well run investment holding corporation. In fact, many believed that Khazanah bled money more than they should deliver to the Federal Government. A  lot of the investments failed and Khazanah as the custodian of Federal Government investments, holdings for commercial activities and a stable of plcs is deemed to be conveniently reckless without much care. The amount of corporate exercises and ventures that Khazanah went through almost seamlessly without much consideration of the outcome. Commercial papers were issued back and forth. Then again Nor Mohamed is known to be personally interested in these corporate exercises.

Under Nor Mohamed’s watch and carefully planned strategic corporate moves and exercises, Federal Government streamlined and structured its control of majority of essential services business. In short, Federal Government is doing active business and with clear intent of making money from the rakyat. Of of these grand plan started when Nor Mohamed coaxed Halim to sell out when the latter had a proposal to resolve all of UEM’s and Renong’s debts, exposures and long term commitments in the same stroke of the MBO.

One thing for sure, Nor Mohamed derived pleasure from playing the role of the ‘Grand Corporate Puppet Master’. In all, Nor Mohamed actually outlived his function when first appointed as Economic Adviser by then Fourth Prime Minister Tun Dr. Mahathir Mohamad for the implementation of the Capital Controls, introduced on1 September 1998 as an immediate remedy to the economic crisis caused by attacks on currency by rogue hedge fund managers in 1997. A former Assitant Governor of Bank Negara, Nor Mohamed expertise then was about currency trading.

George Soros and NMY: Two worthy adversaries

Prime Minister Dato’ Seri Mohd. Najib Tun Razak retained Nor Mohamed in the post PM ‘Flip-Flop’ Abdullah’s Cabinet as the Minister in charge of EPU. This cannot be good for the perception on the Federal Government and confidence of the rakyat for PM Dato’ Seri Najib to do the right thing and make things better for Malaysia, in these trying times of global financial crisis and post PM ‘Flip-Flop’ Abdullah disastrous tenure. One of the three issues PM Dato’ Seri Najib promised in his innaugral speech as the 7th UMNO President on 28 March 2009 is “Combating Corruption”. Nor Mohamed is widely known as a corporate manipulator, especially in all power plays and deals, across the board or back-room involving the GLCs.

The time to change was actually far back. Unfortunately, PM Dato’ Seri Najib is following through all of Nor Mohamed’s plans from day one and Azman Mokhtar and his ‘Merry Men’ are still being retained. Never the less, the gambit of having Nor Mohamed around in a third consecutive prime minister’s tenure still have not benefited the nation. In fact, in a nut shell it became a net loss for the nation. Undoubtedly, Nor Mohamed must go.

*Updated 1000am

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Published in: on September 3, 2010 at 01:29  Comments (41)