From Asian Wall Street Journal
3rd October 2000

Malaysia's Declining Stock Market
Could Slow Corporate Restructuring

By LESLIE LOPEZ Staff Reporter of THE WALL STREET JOURNAL

KUALA LUMPUR, Malaysia -- The declining stock market in Malaysia is threatening to upset the country's already slow corporate-restructuring process.

C. Rajandram, the chief of Malaysia's Corporate-Debt Restructuring Committee, said restructuring plans won't be derailed by the market's downturn. But Mr. Rajandram acknowledged in an interview that should the market remain bearish, creditors of Malaysia's debt-laden companies may be forced to accept debt instruments with longer repayment periods, coupled with a larger margin of debt forgiveness in restructuring plans.

"What we have to realize is that liquidation [of any company] depresses the value of its assets. Restructuring is always a better option for the borrower and lender," he said.

Some Malaysian analysts and private economists have expressed concern, however. They note that a key ingredient in most restructuring plans is the conversion of debt into stock, which can then be sold by the creditor. But to be successful, that approach requires a strong stock market.

The Kuala Lumpur Stock Exchange composite index is currently hovering slightly above 700 points, down more than 30% from its year-high in February. Barring a rebound in stock prices in the near future, Malaysia's corporate-restructuring efforts could grind to a halt, some analysts said.

Financial institutions, struggling to recoup losses on loans to Malaysian companies, aren't eager to accept debt instruments that carry long repayment periods.

Still, Mr. Rajandram predicted that Malaysia's restructuring plans will remain on track. He contended that the current weak market conditions -- which have forced some companies to postpone plans to list profitable businesses to repay debts -- will improve, permitting ailing companies to raise fresh funds.

To date, the CDRC has fielded 73 applications from firms seeking debt-restructuring plans. Twenty-three applications -- representing debts of about six billion ringgit ($1.58 billion) -- were rejected because the companies involved failed to meet the agency's requirements, according to Mr. Rajandram. Of the roughly 43 billion ringgit of debt that the CDRC has agreed to handle, 29 billion ringgit has been restructured, with banks expected eventually to recover 90% to 100% of their loans.

Write to Leslie Lopez at leslie.lopez@awsj.com

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From Asian Wall Street Journal
3rd October 2000

Lee Ming Tee Sets His Sights On Malaysia's PhileoAllied By LESLIE LOPEZ Staff Reporter

KUALA LUMPUR -- Malaysian businessman Lee Ming Tee, who has investments in Hong Kong and Australia, is looking to cash-rich PhileoAllied Bhd., one of the most attractive takeover targets on the Kuala Lumpur Stock Exchange.

Mr. Lee has emerged as the leading contender among several possible buyers stalking PhileoAllied, a largely debt-free concern with a cash horde of 1.2 billion ringgit ($315.8 million).

PhileoAllied's largest single shareholder is Avenue Assets Bhd., a listed company controlled by Mokhzani Mahathir, Prime Minister Mahathir Mohamad's second son.

Finance executives familiar with current negotiations say that possible buyers include banker Azman Hashim of the Arab-Malaysian Banking Group, property developer Lee Kim Yew, who controls Country Heights Holdings Bhd., and Vincent Tan Chee Yioun, who controls the Berjaya group of companies.

But the executives say Lee Ming Tee, the former chairman of the Allied Group in Hong Kong, appears to be the frontrunner in the takeover contest because -- unlike the other bidders -- Mr. Lee is prepared to pay cash for a controlling interest in PhileoAllied. The purchase would include the shares held by Mr. Mokhzani's Avenue Assets.

It isn't clear whether PhileoAllied's other main shareholders, who include investors associated with PhileoAllied's founder, Tong Kooi Ong, plan to dispose of their stock as well.

Bankers say that PhileoAllied has a book value of about 2.70 ringgit a share; that represents a hefty premium over its current trading price of about 1.60 ringgit a share. They suggest that a buyer might pay as much as five ringgit a share to acquire Avenue Assets' 18.4% stake in PhileoAllied.

Mr. Lee, who people familiar with the negotiations say is currently in Australia, wasn't available for comment. Country Heights' Lee Kim Yew didn't respond to requests for comment. Arab-Malaysian's Tan Sri Azman is traveling overseas and couldn't be contacted. A senior executive close to Berjaya's Tan Sri Tan said the businessman had been approached to consider a purchase of PhileoAllied, but declined the offer.

PhileoAllied's unencumbered cash and its listed status has made it an appealing target in Malaysia, where many public companies are still struggling to recover from Asia's 1997-98 financial crisis. Once the holding company for one of the country's fastest growing mid-size banks, PhileoAllied will reap a windfall this year from the sale of its banking and stockbroking operations to Malayan Banking Bhd., Malaysia's largest banking group, for about 1.2 billion ringgit.

What's puzzling corporate analysts, however, is why Mr. Mokhzani's Avenue Assets is willing to sell its PhileoAllied stake. Avenue Assets executives declined to discuss the issue.

According to financial executives close to PhileoAllied, Mr. Lee's interest in acquiring PhileoAllied is part of a plan to consolidate his Malaysian investments, which include listed Mulpha International Bhd. and large tracts of properties, under one corporate vehicle.

Mr. Lee, who was a prominent corporate figure in the 1980s as a Malaysian property developer, later left the country to focus on businesses in Australia and Hong Kong.

Mr. Lee ran afoul of Hong Kong authorities in the early 1990s when he and another Allied Group executive were accused of wrongdoing in connection with the placement of a large block of shares. The two men were charged in 1998 with conspiracy to defraud and false accounting.

In July, a Hong Kong judge halted trial proceedings against Mr. Lee, declaring that the Hong Kong government had abused its powers and prejudiced the trial against the businessman

Write to Leslie Lopez at leslie.lopez@awsj.com

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