No Bailout for Syed Mokhtar, says Tony Pua

June 21, 2012

Government “must guarantee” no bailout for Syed Mokhtar, says Tony Pua

by S Pathmawathy (06-20-12)@

The government “must guarantee” that public funds are not used to bail out tycoon Syed Mokhtar Al-Bukhary if he is unable to settle his RM34.3 billion debt accumulated in building his business empire.

NONETony Pua (DAP-PJ Utara), who raised the issue in the Dewan Rakyat today, also questioned the wisdom of privatising the Penang Port to Syed Mokhtar’s company, which would expand both his “empire and debt holdings”.

He cited examples of corporate debt that had contributed to the stock-market crash during the Asian financial crisis in 1998, including the RM20 billion debts accumulated by Renong Bhd.

“The government must explain the measures being taken to ensure that a repeat of the 1998 financial crisis will be avoided at all costs,” he said.

Debating the RM13.7 billion Supplementary Supply Bill, he said the Penang Port privatisation project could put Syed Mohktar (right) “several more billions in additional debt”.

“Syed Mohktar’s group of companies has a combined debt of RM34.3 billion or more than 10 percent of all local currency outstanding corporate bonds as atf 2011.

“These companies have an estimated total cash and cash equivalent of RM7.8 billion as at May 2012.

“Hence the debt far exceeds that of Renong’s, causing genuine fear of a repeat of a crisis requiring monster bailouts with taxpayers’ funds. This fear is real in light of the global economic slowdown and fallout from the Eurozone financial crisis,” he said.

Major shareholdings and debts

Pua later told reporters that Syed Mohtar has a 51.8 percent stake in MMC Corporation which has an outstanding debt of RM24.2 billion. He owns 55.9 percent of DRB-Hicom, which has a debt of RM5.7 billion.

Tradewinds (M) Bhd, which has a monopoly on rice purchase, import and distribution, has a debt of RM3.48 billion and Tradewinds Corporation Bhd, which runs several five-star hotels in the country owes RM890 million, Pua said.

“The Finance Ministry must make available data on how much our financial institutions and statutory bodies – Employees Provident Fund, Civil Service Retirement Fund, Tabung Haji Fund and Armed Forces Fund – have invested in these debts,” he added.

14 thoughts on “No Bailout for Syed Mokhtar, says Tony Pua

  1. Uhmmm, it no longer a Q of consecutive deficit budget (noted that there are pro & con wrt deficit) but rather the number of Supplementary budget requested per annum (there were instances when it was requested twice!!)

    One would wonder out loud, why this is not in the KPI scheme of things… (hehe, try doing this with your company’s OPEX/CAPEX). Oh, well – raising from 55 to 60 then to 65 years option is stil there. I mean, a large portion pf the EPF are locked into, oopss invested into a lot of gov based interests which is currently xxx with a long term perspective of getting a xxx return with a risk exposure of xxx…. and we all complain about Petronas secrecies…. Hmmm, 65 you say wasit, i guess somebody gotta keep Sir Alex companied – surely cant leave him alone, can ya?

  2. How could SMAB fail when he is handed on a silver platter monopoly of sugar, flour and rice? Not to mention Proton and Manjung Power plant and Tg Bin power plant and Gardenia bakery and Bernas and whatever Port of Tg Pelepas, Penang Port, Kuantan Port, Senai Airport…

    But any business where it is built on borrowed sums and a bunch of managers plucked in to manage without the baptism of fire is bound to fail… Especially of the business is funded by borrowings with high interest payments!

    SMAB is on a bicycle, if he stops pedalling , he will fall. So he needs to keep on acquiring and selling off and juggle the cash flows which incidentally isn’t his…

    Only in Bolehland!

  3. Wow .. Rm 34.3 Billion in debt? Mama mia , the banks and other financial institutions responsible for these loans will soon be taken to the cleaners just like Renong and Tajuddin Ramli did !

  4. SM is just a proxy to umogok. He couldn’t careless because amogok has already accumulated almost a trillion, illicitly transferred out since Mahathir time.

  5. We have yet to learn the lessons of our economic history. How much can Syed Mokhtar’s shoulders bear? When the crunch comes, as it must someday, he will need a massive bailout because he has become too big to fail. So Tony, you will never get the present UMNO controlled government to guarantee us that there will be no bailout for Syed Mokhtar.–Din Merican

  6. Why is Tony Pua talking only one part of the accounting equation? Why is he not talking of the company’s net worth? Or was because he is a Malay Muslim, he cannot own a conglomerate? Would he have asked the same question of other tycoons say Yeoh Tiong Lay. YTL Group also have a lot debts which government institutions have invested.
    Observer, look at the Debt to Equity ratio and Interest Cover of Syed Mokhtar Group. YTL, on the other hand, is a prudent and cash rich company with a strong financial management team led by the dynamic and astute CEO, Tan Sri Francis Yeoh.–Din Merican

  7. amir is right, it is all a ” Conduit “, whether this SM’s Conglomorate meant for Individual cronies of DUM(B) – NO, or the EMAS-TR Scandal, and latterly the Inchoate EMAS-AA Share swap deal which was aborted, there is no necessity for Bail-outs. If they make it, well & good, if Not everything fizzles off in the “future’ – did that not happen like EMAS ” losses” of RM 8 Billion ? Similarly the Forex Loss of 15.5Billion – all but forgotten in the ‘ Anus ‘ of history & written-off. No difference with YTL which is sapping the nectar over & above TNB in their symbiotic partnership, through public consumers paying Twice to cater for both their ” profits ” – why are we not surprised that simple things like Maxis mobile phones & Astro bills public pay, the Net profit recorded for Year 2011 was RM2.51 billion AFTER Tax ?
    i am naive in this, but i don;t think bail-out is necesary, b’coz future Mega things will take care of itself ?

  8. Renong used to make the case to their bankers that each of their projects was viable on a stand alone basis. Renong collapsed because this actually wasn’t so and because of the foreign currency loans which they had to service from depreciated ringgit inflows.

    SM’s case, while similar in amounts of leverage to Renong, maybe less risker because the investments are mainly in essential commodities and borrowings are ringgit denominated. Also being the preferred supplier to the armed forces should help ride the rough times.

    Pua should look at each of SM’s projects and pinpoint which are riskier than others, else he could be accused of being a politician and an alarmist..

  9. Re: Din Merican,
    So you are writing that SM Al-Bukhary is not the dynamic and astute CEO also without a strong management team?
    Did I say that? I talk about YTL, a company which has a strong balance. Good management will not allow over leveraging.

  10. there is nothing racist about such inquiry. It is for the betterment of the future generations, which of course many refused & too blur sotong to observe. The eventual bailouts will have the money extracted from epf, govt securities etc…its your money stupid!

    Just give me one of those monopolised business on a silver platter, I can almost guarantee you a 10:1 ROI in 5years. Or at worst, with 1hand tied behind, 2:1 and more asset to debt ratio!

  11. Din,

    Remember Alan Bond the richest man from Perth Australia. He try to fight Tony Roland from Lonro Group to take over Chartered Bank.Tony who owned Financial Times just prined the story on Alan Bond, about how much he owned the bank around the world. Most of the bansk didn’t know each other and how much Alan liability had with them.There was panic among the bankers when they started to demand payment from Alan Bond. Bond’s empire collapsed within six months.

    Syed Mokhtar become rich because of Muhiyuddin and later Tun Mahathir.His basic background in education from Alor Star secondary school and not from LSE like Tony and Aireen of Air Asia.
    Alan Bond collapsed due to over leveraging and paid a heavy price. He went to jail.–Din Merican
    Syed’s knowledge in accounting and finance is very basic.If he buy a cows from Thailand 1000 rgt per head and he sells 2000 to Trader in Alor Star.He make 1000 gross,after minus smuggling cost maybe he makes net 500 rgt. He is vary smart,personally he is vary rich,worth one or two billion rgt but the companies will suffer.

    As long as he keep getting the big projects,he can keep spinning the company finance,he should be alright.He is like a music machine.One the music stop,the bankers will scramble looking for chair.

  12. Maybe this is SM and umogok’s strategy to hold a Pakatan Government to ransom should they win GE 13. Rm 34.3 billion is enough to destabilize the country’s financial system should there be a default on any of these loans.

  13. Huh? Wasnt Syed Mokhtar handed the TNB, sugar Gardenia, etc projects? Robert Kuok who previously had the sugar and bread business is currently top 3 richest man in Msia. How come SM’s companies caan be in so much debt?
    Now its clearer why DRB Hicom is given the military tank/truck project. The price quoted for Msia is 5X higher than what other countries bought their tank for

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