KUALA LUMPUR: Tan Sri Pheng Yin Huah, the founder of debt-ridden Kinsteel Bhd, vows that he will turn around the integrated steel maker if its newly-announced major rescue plan is approved by all interested parties.
“If this rescue plan is supported by the bankers, lenders and the authorities, I have confidence that we can turn the company around and transform it into a bigger and profitable steel player. It will restore the glory of the old days, ” he told StarBiz in a recent interview.
Yin Huah, who is also Kinsteel managing director, hopes that the company will return to profitability “within two years”, once its operation is back to normal.
Hit by years of losses and high debts, Kinsteel Group has proposed an extensive and complex regularisation exercise to extricate itself from debts by asking banks and holders of corporate guarantees to take a massive haircut of its RM1.68bil liabilities.
“I will be immersing wholeheartedly into (restructuring) Kinsteel to make sure it will return to profitability, now that I have left Huazong after serving as its president for 10 years, ” Yin Huah pointed out.
Yin Huah retired as president of the Federation of Chinese Associations Malaysia (Huazong) two weeks ago, after raising RM100mil over the last 10 years to build the 12-storey Wisma Huazong in Serdang, Selangor.
He acknowledged the fact that he had neglected Kinsteel due to his active involvement in Huazong.
Despite the setback in Kinsteel, Yin Huah, however, could still afford to donate generously to Huazong mainly because his other non-listed businesses in steel trading and electronics remained profitable.
After Huazong, he said, “It will be back to seriously looking after the business in Kinsteel for me”.
But even during his busy days in Huazong, Yin Huah had attempted to look for a white knight for Kinsteel and its listed steel subsidiary, Perwaja Holdings Bhd.
Although one deal was sealed, it turned sour after the “white knight” from China backed out.
Kinsteel, a Practice Note 17 (PN 17) company in liquidation currently, has proposed to its bankers and other lenders to accept a debt waiver amounting to RM1.6bil.
The company, set up in 1991 by Yin Huah, used to be one of the largest steel millers in Malaysia and among the more profitable integrated players in the region.
The good times, however, came to an end with the prolonged dip in steel prices.
In addition, the bad decision of Kinsteel to buy a 51% stake in ailing steel player, Perwaja in 2006, hit both companies hard when steel prices spiralled downwards from 2009.
Perwaja’s high energy costs and towering debts, plus the corporate guarantee of RM800mil borne by Kinsteel, weighed heavily on Kinsteel’s financial performance for almost 20 years.
Perwaja has since gone under and delisted.
The steel manufacturer, the brainchild of Prime Minister Tun Dr Mahathir Mohamad, was set up in the 1980s to start Malaysia’s steel manufacturing. But Yin Huah did not ask the government to bail out Perwaja.
For Kinsteel that has retained its listing status, banks are owed RM815.20mil or 48.5% of the total RM1.68bil in liabilities, while other lenders and corporate guarantee holders are owed RM865.60mil or 51.5%.
While some analysts have cast doubts on the acceptance of the scheme, Datuk Henry Pheng, the personal assistant to his father Yin Huah, disclosed to StarBiz that the rescue scheme was arrived at after six months of negotiations and discussions with creditors.
“This scheme was drafted after extensive discussions and negotiations with all bankers and lenders. We have obtained their clearance to announce this plan, ” said Henry, who has been involved in the negotiations.
He said the scheme, targeted for completion in the third quarter of 2020, will be tabled at a court-convened meeting next month for the approval of creditors.
“We are ready for the court-convened meeting at the end of October, and we are confident we will get enough support at this meeting, ” said Henry, who recently stepped down as CEO of Kinsteel.
Financial institutions, which command about 90% of the votes, have to obtain their board approvals before the meeting, he noted.
For the rescue plan to take place, Kinsteel needs to have 75% support from creditors.
At the end of the whole corporate exercise that includes a cash settlement, the issue of rights and warrants, and new placements, the Pheng family will still be in control of Kinsteel.
The family is expected to hold about 27% in Kinsteel, as it has undertaken to subscribe to new shares and placements.
Tan Sri Abu Sahid Mohamed, a key business partner of Yin Huah, is likely to hold about 5% in Kinsteel at the end of the corporate exercise.
“The whole scheme is meant for the Pheng family to still control Kinsteel, ” Henry pointed out.
Although the steel industry is facing a lot of challenges and the outlook of steel prices is still dim, Yin Huah expressed his full confidence in Kinsteel, moving forward.
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