12 Questions about the biggest corporate catastrophe in nation’s 56-year history – the RM2.34 billion UEM-Renong deal in 1997

The mega-billion-ringgit suit filed by Umno-created tycoon Tan Sri Halim Saad against the government three days before the 13GE Nomination Day on April 20, 2013 to demand full settlement of an over RM2 billion deal that forced him to relinquish his controlling stake in Renong Bhd more than a decade ago has re-opened questions about the nations’ biggest corporate catastrophe in the nation’s 56-year history.

This was the RM2.34 billion UEM-Renong deal in 1997 which precipitated the biggest crash in the Kuala Lumpur stockmarket in the 1997 financial crisis, causing the Kuala Lumpur Composite Index to fall by 19.58 per cent, from 667.29 to 536.62 points in three days, wiping out RM70 billion of the investors’ funds in the stock exchange.

In his mega-billion-ringgit suit, Halim, once the sole corporate nominee of the ruling Umno, was offered RM1.3 billion in cash and property as well as control of a private waste management company, roughly valued at RM2 billion, in exchange for his disposal of Renong in the 2001 agreement.

But Halim had since only received RM165 million despite giving up his business empire and will be demanding the remainder.

The Edge Malaysia reported that Halim attempted to pressure the government into full settlement, but in 2010, former Prime Minister Tun Dr Mahathir Mohamad told him the agreement would not be honoured.

The Edge Malaysia article wrote: “Halim held numerous meetings with Dr Mahathir — even after the latter quit as premier in November 2003 — and Nor Mohamed to push for a full settlement but he was repeatedly fobbed off.

“Some time in April 2010, Halim met with Dr Mahathir to try to seek a resolution to the matter but was told that the government would not be honouring the agreement.

“Businessmen familiar with the situation say that Dr Mahathir told Halim that he had been informed by Nor Mohamed that the assets taken over by Khazanah belonged to Umno.”

The article said Halim then met with Tan Sri Nor Mohamed Yakcop, then a minister in the Prime Minister’s Department in charge of the Economic Planning Unit, who confirmed Dr Mahathir’s words.

The suit, set to be one if the biggest corporate battle in the country, will expose for the first time the “behind-the-scenes dealings in several multibillion dollar transactions and contract awards that shaped corporate Malaysia between the mid-1980s and the early part of this decade” – including “insights into how Umno created a political money-making machine around Renong and its associated concern, United Engineers Malaysia Bhd (UEM).

“It will offer Halim’s account of how he ceased to be a business nominee of Umno and also provide a personal confession of the gruelling years the businessman went through as he battled to keep debt-laden Renong afloat,” the magazine wrote.

In November/December 1997, both in and out of Parliament, I had posed questions about the multi-billion ringgit UEM-Renong corporate catastrophe, but none of answers have been forthcoming.

The time has come for these questions to be answered.

On 26th November 1997, I posed four questions, viz:

“Firstly, Renong executive chairman Halim Saad had said that the UEM purchase of 723 million Renong shares was made in a series of transactions on the open market.

“However, in the past month, the trading volume of Renong shares on the open market amounts to some 112 million shares, which represents only about 15 per cent of UEM’s deal even if every share was bought up by UEM. This would mean that some 611 million Renong shares (or 85 per cent ) were bought through off market trading.

“Secondly, UEM announced that it had acquired 723 million Renong shares, representing a 32.6 per cent stake, from the open market for RM2.4 billion or an average of RM3.24 per Renong share. However, in the month before November 17, when the deal was announced, the price of Renong never reached RM3.24 per share – the highest being RM3.22 per share on 15th October and the lowest being RM3 per share on 14th November and RM2.90 on November 17.

“Thirdly, who are the seller or sellers for which UEM paid a premium price of RM3.24 a share, when Renong was last traded for RM2.90 before the announcement of the UEM-Renong deal, and was traded last Friday at RM1.80 per share before suspension of the counter yesterday.

“Fourthly, what are the bank or banks which lent UEM the RM2.4 billion to pay for the 723 million Renong shares.

“Can the UEM management give full and satisfactory answers on these four issues to establish the accountability and transparency of the UEM-Renong deal, which had been the single corporate decision which had precipitated the biggest crash in the Kuala Lumpur stock market in the four-month economic crisis, causing the KLSE Composite Index to fall by 19.58 per cent, from 667.29 to 536.62 points in three days, wiping out RM70 billion of the investors’ funds in the stock exchange.

“When the market reacted in outrage as well as panic to the UEM-Renong deal, which was seen as a UEM bail-out of Renong to the detriment of the UEM minority shareholders, it was Halim Saad who, as Renong executive chairman, gave a press conference where he emotionally refuted speculation that it was a bail-out attempt, and asked: ‘Isn’t that a good deal for UEM? Why do you say it is a bail-out for Halim Saad and Renong?’”

In Parliament on 11th December 1997, I posed ten questions on the UEM-Renong deal, viz:

“Yesterday, I had specifically raised five questions:

• whether it is true that the RM2.34 billion UEM-Renong deal is actually a bail-out for Tan Sri Halim Saad in his US$800 million purchase of Philippines’ National Steel Corporation (NSC) from Wing Tiek Holdings Bhd, through his proxy, Abdul Rashid Manaf, through the shell company Hong Kong-based Hottick Investment Ltd as well as take over the liabilities.
• whether it is true that four banks, namely Maybank, Rashid Hussein Bank, Bank Bumiputra and Bank of Commerce shared equally in the syndicated US$800 million loan, given to Abdul Rashid Manaf in December last year, guaranted by Halim with Renong shares;
• whether the four banks had breached the rule on single customer limit which, I understand is RM450 million for Maybank, RM250 million for Bank Bumiputra and Rashid Hussain Bank and RM150 million for Bank of Commerce – all exceeded by the four banks when they each give Abdul Rashid Manaf a loan of US$200 million (or RM500 million at the time).
• Whether it is true that the UEM-Renong deal was necessitated by the drastic fall in the price of Renong shares which were used as collateral for the personal guarantee by Halim Saad for the US$800 million loan, as in January, the price per share of Renong was RM4.58, but it fell to RM2.90 per share on 17th November, the date of the announcement of the UEM-Renong deal, which is a fall of 36.68 per cent. If the entire collateral is in Renong shares, it would mean a top up of 37 per cent of US$800 million, which comes to about US$300 million, and at current exchange rate, this would work out to over RM1 billion.
• whether these four banks were also the banks which have given UEM the RM2.34 bill loan for the acquisition of 723 million Renong shares.

“Today, I want to pose five further questions:

• Whether it is true that Abdul Rashid Manaf, who is a lawyer practising in Kuala Lumpur, to whom the US$800 million loan was given, did not have the creditworthiness for such a colossal loan.
• Whether Halim Saad was the beneficial owner of the 32.6 per cent stake in Renong which was bought by UEM from eight nominees. According to Form29A dated Nov. 26 to Renong, a copy of which was furnished to KLSE and which was reported in the Sun of November 29, 1997, UEM said it bought eight tranches of Renong shares registered under various holders totalling 722.883 million shares on Nov. 17. The first tranche, for 340.2 million shares, was registered under BOC Nominees (Tempatan) Sdn. Bhd., the second for 285.715 million shares was registered under HLB Nominees (Tempatan) Sdn. Bhd while the third under Rashid & Lee Nominees (Tempatan) Sdn. Bhd. was for 67.407 million shares. Other blocks were 18.06 million shares (Lintasan Savana Sdn. Bhd), 9 million shares (RHB Nominees), 1.5 million shares (Multi-Purpose Bank Nominees), 1 million shares (BHLB Nominees) and 5 million shares registered under Pengkalan Nominees (Tempatan) Sdn. Bhd.
• Furthermore, if Halim Saad was the beneficial owner of the eight tranches of Renong shares totalling 722.883 shares, whether he had committed offences under the Companies Act for not filing a declaration as well as under the Code on Take-Over and Merger in failing to make a mandatory general offer to minority shareholders, as together with 23.3% personal stake in Renong (which he admitted in a press conference on November 19), he would have owned 55.9 per cent of Renong shares – well beyond the 33% trigger point.
• The government has been calling on banks to be prudent to tide over the banking crisis by giving priority in allocating credit to borrowers engaged in productive activities in high-technology, foreign exchange earnings industries such as tourism and export-oriented sectors of the economy. How can US$800 million loan to acquire a foreign firm or RM2.4 billion to enable UEM to acquire 32.6 per cent stake in Renong from the eight nominees come under such a category of prudential loans?
• If the four banks could breach the single customer limit by giving mega-loans which violate the government’s guidelines on bank loans, what is the magnitude of the such unproductive mega-loans in the banking and financial sector in the country. “

Can Malaysians expect answers to these 12 Questions in the first meeting of the 13th Parliament, 16 years after the multi-billion ringgit UEM-Renong catastrophe?