Tuesday March 22, 2011

Let market forces prevail in JCorp exercise

JOHOR Corporation (JCorp) is again in the limelight.

Last week an unsigned “surat layang” with outrageous allegations surfaced.

Then yesterday, the Malay Chamber of Commerce conducted a press conference to express concerns that JCorp could be selling some of its prized assets to non-bumiputra parties in order to solve JCorp's debt problems.

The chambers' president, Syed Ali Al-Attas, also said that if indeed JCorp was going to sell some of its assets such as its 53% subsidiary Kulim (M) Bhd, then the Malay Chamber of Commerce and some of its partners would be very happy to buy the assets, to ensure that they remained in bumiputra hands.

Syed Ali has one point right - that it would be a loss to all stakeholders of JCorp if prized assets within the group were to be hived off indiscrimately.

But Syed Ali should be digging deeper and asking more crucial questions.

Such as how and why did JCorp end up in the unenviable state it is in? (The unenviable state being having RM3.6bil in debt due next year, and with hardly any free cash flows coming from dividend payments from its companies due to the odd structure of how the group has been built up over the years.)

Not only that, Syed Ali should also be miffed by past deals done by the past management of JCorp that entailed the hiving off of key assets to non-bumiputra parties.

Consider this; last year Kulim disposed of its entire 91.38% stake in Natural Oleochemicals Sdn Bhd to PGEO Group Sdn Bhd, a subsidiary of Singapore-listed Wilmar International Ltd.

More significantly, JCorp is also said to have entered into a deal to sell land and buildings in Pusat Bandar Damansara to Malton Bhd's executive chairman Datuk Desmond Lim Siew Choon, according to a business weekly report.

President of the Malay Chamber of Commerce Tuan Syed Ali Al-Attas gave a media briefing yesterday.

That deal was said to be valued at RM700mil. However since then, Pusat Bandar Damansara has been earmarked as one of the proposed mass rapid transit (MRT) key stations and indications are that the property is now worth much more than that.

No wonder the weekly report stated that JCorp is now rethinking the sale of its Pusat Bandar Damansara land and that some top officials in JCorp have been told to look into the possibility of rescinding the deal.

The fact remains though that despite its asset-rich status - JCorp is a conglomerate that counts over 200 companies in its stable, including five listed companies and a real estate investment trust - JCorp is facing a huge problem of having to settle the RM3.6bil in debt that is coming due.

It has also been a bit puzzling as to why JCorp appointed CIMB Investment Bank and Maybank Investment Bank as its advisors for its restructuring.

This is considering that both banks are the main creditors of JCorp.

Ideally, what JCorp needs is an independent party to look into the whole group and how best to handle its crippling debt problem while retaining as much of its profitable assets as possible.

So far JCorp has said that it is not looking to sell any of its assets quickly and is looking into refinancing its debt.

But even in a refinancing scenario, JCorp would most likely be needing to pare down some of that RM3.6bil and roll over the balance.

Arguably, asset sales, if any, should be done to fetch the highest prices for JCorp.

And there shouldn't be hesitation to dispose of non-core assets, again, at the right price. Only then will all the stakeholders of JCorp be best served.

  • Deputy news editor Risen Jayaseelan recalls that one company called Asas Serba Sdn Bhd had also used the platform of the Malay Chamber of Commerce some time last year to put in a bid for PLUS Expressways Bhd.

    Related Stories:
    Action plan on JCorp's debts
    JCorp denies ex-CEO's claim over plans to sell Kulim
    JCorp selling land to repay part of debt
    JCorp to focus on resolving RM3.6bil debt, core businesses


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