From The Business Times, Singapore
13th December 2000

UEM deal with Halim dents KL market

By Eddie Toh in Kuala Lumpur

THE Kuala Lumpur market took a knock yesterday as investors dumped stocks of Renong Bhd and associate United Engineers Malaysia (UEM) following the latter's decision to allow tycoon Halim Saad to delay payment for about RM3 billion (S$1.4 billion) worth of Renong shares he had agreed to buy from UEM.

UEM tumbled 38 sen or 10.5 per cent to RM3.24 -- a staggering fall of 72 per cent from its peak of RM11.50 this year. Renong fell by 18 sen or a hefty 13 per cent to RM1.20, way below its high of RM3.34 this year.

The selldown of the two stocks dragged the entire market down on concerns over the ability of cash-strapped Malaysian companies to stick to their restructuring plans. The Kuala Lumpur Stock Exchange Composite Index shed 11.2 points to end at 724.89 points.

On Monday, UEM gave Mr Halim, who controls both Renong and UEM, another year to pay for the bulk of the Renong shares he had agreed to buy from UEM under a put option. Instead of having to honour his own pledge to buy the 32.3 per cent Renong stake for RM3.17 billion from UEM by Feb 14 next year, the beleaguered tycoon will now have until May 2002 to cough up the money. He will only pay RM300 million in three instalments next year.

UEM told analysts that the put option has been effectively honoured, arguing that Mr Halim will start paying by next year. However, analysts chided UEM for not exercising its rights to protect its own financial health.

"The potential of further restructuring and risk associated with such a plan cannot be ruled out," said HLG Securities, adding that investors should sell UEM although it is now trading at a steep discount of 70 per cent to its revalued net asset value.

UEM first rocked the market in 1997 when it depleted its cash to buy the Renong shares. To placate UEM's minority investors, Mr Halim then promised to buy the Renong shares from UEM if Renong's price remained below RM3.24 by the end of this year. The unhappiness over the put option may make it more difficult for UEM to buy the pledged assets of Renong.

UEM will now pay RM5.4 billion for Renong's pledged assets instead of RM6.7 billion as proposed earlier.

The lower price tag is due to the exclusion of two assets -- monorail company Putra for RM1 billion and Time Investment Cayman Limited's receivables for RM378 million.

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From The Business Times, Singapore
12th December 2000

Halim Saad buys more time to fulfil Renong put option

He will pay UEM RM100m each on Feb 14, July 14, Dec 14 with the balance plus interest on May 14, 2002

MALAYSIAN tycoon Halim Saad is set to spook the Malaysian stock market again, after he managed yesterday to convince United Engineers Malaysia to grant him one more year to fulfil his pledge to buy from it a 32.3 per cent stake in Renong Bhd for over RM3.17 billion (S$1.4 billion).

Instead of buying the entire batch of Renong shares as promised by next Feb 14, Mr Halim, who controls both Renong and associate UEM, will pay in four instalments.

The first three instalments of RM100 million each will be paid on Feb 14, July 14 and Dec 14 next year.

The remaining bulk of the payment, including interest, will be settled on May 14, 2002.

The shares will only be transferred to Mr Halim upon full settlement of the obligation.

The new arrangement to side-step the original agreement in 1998 is not expected to please many disgruntled investors.

"If he can't pay up next year, can he come up with more money in 2002?" asked an analyst, citing the repeated assurances by UEM and Mr Halim that the original agreement would be honoured.

Assuming the same interest charge of about 9.4 per cent, Mr Halim will have to cough up almost RM3.5 billion by 2002.

UEM first spooked the market when it acquired the 721 million Renong shares from unnamed shareholders at RM3.24 apiece in November 1997.

The controversial purchase triggered a meltdown of the stock market as investors feared that UEM's purchase of the shares from influential owners at its own expense could be a precursor to more bail-outs in the corporate sector.

Following the uproar and the crack in the share price of both Renong and UEM, Mr Halim granted a put option to buy the Renong shares from UEM if Renong's share price remained below RM3.24 by Feb 2001. The counter closed at RM1.38 yesterday.

Analysts said Mr Halim is banking again on the share price of the Renong shares to breach RM3.24 by 2002 instead of coming up with RM3.5 billion in cash.

This could be done through UEM's latest plan to take over all the pledged assets of Renong except its 38 per cent stake in UEM.

UEM yesterday slashed the purchase price of the proposed acquisitions of the assets from RM6.7 billion to RM5.4 billion -- a hefty discount but still substantially higher than Renong's market capitalisation of less than RM3 billion.

If successful, UEM could then proceed to dispose of the Renong assets to repay Plus, a subsidiary of UEM and the operator of the North-South Expressway.

Plus had issued RM8.4 billion in bonds to help shave the debts of Renong and UEM last year. Renong and UEM, in turn, have to raise funds to repay Plus to pave the way for the listing of the highway concessionaire.

"Halim is trying to unlock the value of Renong so that he doesn't have to fulfil the put option," said a source close to Renong.

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From The Singapore Straits Times
13th December 2000

UEM shares plummet as Halim defers payment for Renong shares

KUALA LUMPUR - United Engineers Malaysia (UEM) shares sank to a 19-month low on Tuesday after the nation's largest builder said it accepted vice-chairman Halim Saad's plan to defer over two years payment for a stake in Renong.

On Monday, Halim offered to buy 31 per cent of Renong from UEM for RM3.16 billion (S$1.4 billion), exercising an option due in February next year to buy the stock of the country's most indebted group.

Mr Halim said he will pay RM300 million between February and December next year and the rest in May 2002, effectively buying time.

The agreement 'postpones the problem', said analyst Terence Wong at GK Goh Research.

UEM was supposed to have been paid in February, he said, maintaining his 'underperform' recommendation on the stock.

UEM shares slumped for a third day, losing 38 sen, or 11 per cent, to RM3.24, their lowest level since May 13 last year. Some 11 million shares changed hands, making it the most active stock in Malaysia.

It is also their biggest one-day percentage drop since Nov 24.

The shares have fallen 39 per cent in the past month, shaving RM1.7 billion off their market value.

It is also the worst-performing stock on the benchmark Composite Index in that period.

'The announcement was a great disappointment and the saga between Renong and UEM will continue,' OSK Research said in a note to clients.

Renong shares fell 18 sen, or 13 per cent, to RM1.20, its fourth day of decline.

The fall in UEM helped push Malaysia's benchmark Composite Index lower by 1.5 per cent, its biggest drop since Nov 23.

At a briefing on Monday, UEM told analysts that Mr Halim would be unable to fully settle the Renong stock purchase in February 'due to market conditions', OSK said.

Mr Halim, a close associate of Finance Minister Daim Zainuddin, also agreed in October to pay RM874.7 million to boost his stake in Time Engineering to 38 per cent from 16.4 per cent.

That will raise the amount of money he needs to cough up to RM4 billion.

With the deferment, 'people are also sceptical' about Mr Halim repaying by 2002, said Choo Swee Kee, manager for investment at KLCS Asset Management, which manages US$260 million (S$450 million). --Bloomberg News

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