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AWSJ: Politics May Be Blocking RHB's Plan
By Chris Prystay

7/2/2001 2:44 am Wed

[RHB kini sedang dihantui masalah apabila dirasuk oleh orang yang bermasalah. Keadaan ekonomi yang semakin genting menyebabkan poket para kroni semakin runcing dan mereka akan berbuat apa saja untuk mengepam dana ketembolok mereka.

Untung dan rugi orang lain belakang kira - malah mereka sanggup menelan dan membakar bank atau membunuh orang asalkan hutang berjuta-juta mereka tidak diketahui sesiapa. RHB kini menjadi mangsa satu permainan koporat yang tentunya akan berakhir dengan ramai pihak yang tersiksa. Siapa mereka nanti jika tidak rakyat juga.
- Editor

Source: The Asian Wall Street Journal

5th February 2001

Heard In Malaysia:

Politics May Be Blocking RHB's Plan

By CRIS PRYSTAY Staff Reporter

KUALA LUMPUR -- Fears that politics may be trumping business logic prompted some analysts to lower their recommendations on RHB Capital, and helped cap a nine-day rally on Kuala Lumpur's stock exchange.

The Ministry of Finance threw a surprise spanner into RHB Group's restructuring plans Friday when it rejected a proposal by RHB Capital to pay a 38% premium to buy back shares that its subsidiary, RHB Bank, had issued to Malaysia's national bank restructuring agency in 1999.

Analysts suspect the move may be a ploy to wrest control of Malaysia's third-largest bank from a businessman out of favor with the ruling United Malays National Organization. It also may leave RHB Capital's shareholders in the lurch.

If the restructuring agency, Danamodal Nasional, keeps and converts the shares, the finance ministry would control the second-largest block of stock in RHB Bank through a 30% stake now held by state-owned investment vehicle Khazanah Nasional, plus a stake of about 14% that Danamodal would hold.

At the same time, RHB Capital's existing 70% stake in its subsidiary would be diluted to 56% if the shares are converted, leaving investors with a smaller exposure to the growth potential of unlisted RHB Bank, one of 10 so-called anchor banks that will emerge upon the completion of a government-mandated finance-sector consolidation plan under way.

"If you look at this from a commercial aspect, it really doesn't make sense, firstly given Danamodal's temporary role and secondly, the premium they offered," says Tan Pye Sen, a bank analyst at J.P. Morgan in Kuala Lumpur. "The market was under the impression that when banks turned a corner and were in a position to repay their loans, Danamodal would take it and get out of the business."

A person close to Danamodal says the agency was "comfortable with the price" RHB Capital offered. The finance ministry, which declined to respond to faxed questions, hasn't issued a statement explaining why it refused to let RHB Capital buy the shares from Danamodal, a temporary agency set up to recapitalize Malaysia's banks after the economic crisis. Several investment banks downgraded the stock Monday to a hold or sell from a buy. RHB Capital's shares shed 3.1%.

Analysts widely believe the move was designed to thwart RHB's chairman, Rashid Hussain, once close to the ruling party but whose relations with the finance ministry have chilled since the economic crisis, and say it could derail Tan Sri Rashid's plans to list RHB Bank. Analysts say it is unlikely Tan Sri Rashid would proceed with a listing if the government were to hold on to any large stake in the bank.

Tan Sri Rashid controls 7.6% of RHB Bank through a 55% stake in RHB Capital, which, in turn, is held by his 24%-owned investment-holding company, Rashid Hussain.

Tan Sri Rashid ran into problems last year when Malaysian Resources Corp., which holds a 22.7% stake in Rashid Hussain, attempted to block RHB Bank's plan to make the acquisitions necessary to garner anchor-bank status. A few months prior, Malaysian Resources had undergone a management makeover and several associates of Finance Minister Daim Zainuddin joined the company.

"They don't want Tan Sri Rashid holding on to the No. 3 bank. Otherwise, I just don't see any other logical explanation. From a taxpayer's point of view, this (the offer) is a great deal," says a bank analyst at a U.S.-based brokerage firm.

In a statement issued to the Kuala Lumpur Stock Exchange Friday, RHB Capital said it will abort a proposed 650 million ringgit ($171 million) bond issue intended to pay for Danamodal's preference shares. The 730 million ringgit it raised through its restructuring efforts that also had been earmarked for the share buyback will now be used to reduce existing bank borrowings, according to the statement. The RHB Group in September announced its proposal to pay 1.38 billion ringgit for the one billion ringgit of RHB Bank irredeemable noncumulative preference shares held by Danamodal, as part of its bank merger restructuring plan.

Some analysts reckon that the government may have blocked the share purchase to keep RHB from issuing more bonds to finance its existing debts. But others say that passing the debt from taxpayers to market investors is an entirely acceptable move, especially given RHB Bank's future position as an anchor bank.

"It doesn't make sense. It seems the government wants to hold on to the stake at the expense of taxpayers," said an analyst at a U.S. investment bank. "This doesn't do much for corporate governance."