Wednesday, February 25, 2009

IJM and Talam

Corporate: Talam pushing for debt-conversion plan By Siow Chen Ming The Edge Daily (dated: August 2008)
Talam Corp Bhd, a troubled property developer, is pushing for a massive debt-to-equity restructuring scheme that its lenders may find hard to reject. Not that the proposal is favourable, but because the lenders have limited options. The bulk of the debts concerned have no financial recourse to Talam the listed company, but mainly on the company's operating subsidiaries that develop certain housing projects. "Talam's stance is obvious. Bondholders can either accept the scheme on the table or take over the housing projects, which secure the bonds," says a source. The prospect of the second option is bleak. If bondholders were to take over the housing projects, they will have to confront a group of angry house buyers who are getting frustrated over the slow construction progress in Talam's projects.

Inclusive of debts issued by special purpose vehicles, Talam group's total outstanding borrowings amounted to about RM1 billion.

The largest chunk is in the form of an outstanding RM498 million Islamic bond (BaIDS) issued by special purpose debt vehicle Ambang Sentosa Sdn Bhd. Ambang Sentosa had issued the BaIDS and utilised the proceeds to purchase from Maxisegar Sdn Bhd (wholly owned by Talam) the rights to the sales receivables of the Puncak Jalil township project. The BaIDS is secured on the housing project. According to sources, Talam has proposed to settle the outstanding BaIDS issued by Ambang Sentosa with a final settlement of RM348 million. This will be in the form of RM62 million cash (which is already in the escrow account) and the issuing of RM286 million five-year redeemable convertible preference shares (RCPS) in Talam bearing zero interest. While this indicates a haircut of about 30% or RM150 million, Talam has offered to bondholders the rights to a pool of future sales proceeds, amounting to RM69 million, from the sale of the remnants of unsold units.

The group is also proposing to settle in full another outstanding bond of RM196 million in the form of Murabahah notes facility (MUNIF) issued by indirect wholly owned subsidiary Europlus Corp Sdn Bhd. The group plans to replace the MUNIF with five-year redeemable convertible secured loan stocks bearing zero coupon. The issuing of secured loan stocks is preferred over RCPS because the MUNIF is currently secured on some landbanks, apart from sales receivables from development projects that include Bukit Beruntung I, II, and III, Lagoon Perdana, Kinrara Section 3 and other projects.

On another note, the outstanding RM163 million MUNIF issued by Perkspektif Perkasa Sdn Bhd (PPSB), the developer of the Bandar Pinggiran Cyber township project in Cyberjaya, will also be featured in the debt-restructuring scheme. Unlike the bonds issued by Ambang Sentosa and Europlus, the PPSB's MUNIF has an unconditional financial recourse to Talam.

As for the remaining term loan of about RM230 million, Talam has planned to settle it by issuing RCPS or other instruments that are convertible into Talam shares.

Based on maximum scenario, the conversion of all these instruments, which will be issued to replace the group's debts, may dilute Kumpulan Europlus Bhd (K-Euro)'s interest in Talam to about 25%, from 47% currently. "Talam's management is busy conducting meetings with the lenders. A formal bondholders' meeting will be held in September and if approved, these proposals will be submitted for regulatory approvals. The implementation of the debt-conversion scheme is expected to be next year," says a source.

Talam, once known as the most productive house developer, ran smack into trouble last year (2007). It was unable to carry out construction works in its development projects according to schedule. Work progress in its largest project, Puncak Jalil, has been particularly affected. All these have resulted in the group being unable to receive progress claims from end-financiers and hence led to a mismatch of cash flow to meet debt obligations. The management had previously put the blame for these stalled projects on the shortage of sand, steel, workers and the government's suspension of hill slope work. However, bondholders are not convinced. "At the end of the day, the project failed because the group could not put up money for the balance development costs," says a representative of a bondholder.

In the Puncak Jalil project, for instance, the remaining cost to completion is estimated to be RM305 million (construction cost RM295 million plus development charges of RM10 million). To restart the project would require sizeable capital that Talam, in its dire straits, could not afford to come up with. This is why Talam is roping in IJM Corp Bhd to undertake the construction of the Puncak Jalil project for RM295 million, inclusive of a 15% margin. The participation of IJM in this project is crucial for bondholders to agree to its debt-restructuring scheme.
IJM into the picture The situation in Talam could be much worse if not for the participation of IJM.

Other than agreeing to become the main contractor for the Puncak Jalil project, a source says IJM has acquired some of the smaller and uncompleted development projects from Talam for a sum of over RM100 million. These include the Monte Bayu condominium project in Cheras, Ukay Perdana as well as some projects in Puchong. IJM has resumed work in these projects and is now marketing the unsold units under the IJM banner.

"This has provided some necessary cash flow to keep Talam running. Nevertheless, IJM also takes this opportunity to increase its exposure in the property development sector as there are not many construction jobs around," says the source.

IJM has yet to finalise its purchase of a 25% stake in K-Euro, Talam's parent company, from Tan Sri Chan Ah Chye. This is pending the signing of the RM3 billion West Coast Highway concession between K-Euro's 60% owned subsidiary Konsortium LPB Sdn Bhd and the government. According to K-Euro's annual report released early August, Konsortium LPB has finalised the technical and financial terms as well as the conditions of the concession agreement with the government. These are now pending approvals.

Should the West Coast Highway concession be signed, a source says the construction of the highway will be undertaken by a turnkey contractor to be set up by IJM and K-Euro on a 50:50 basis. This would allow K-Euro to reap the construction profits as well as cash flow, before the highway commences tolling.
This format of collaboration is visible from IJM and K-Euro's ongoing joint venture in developing some 3,900 acres of landbank in Kuala Langat (near Kota Kemuning, Shah Alam). This is through Radiant Pillar Sdn Bhd, a joint venture set up by IJM and K-Euro with equal stakes. Radiant Pillar owns 70% stake of Canal City Construction Sdn Bhd. The latter has received the Kuala Langat landbank from the Selangor government as payment in kind for constructing a toll-free expressway linking Shah Alam-Shah Alam 2 together with the flood mitigation project. The value of the two projects is RM1.1 billion.

The Kuala Langat landbank will feature prominently in the property development business of IJM and K-Euro. Both companies, through JV Radiant Pillar, have plans to develop the Kuala Langat landbank into an upscale project based on the "Venice" concept of a canal city.

K-Euro is in a better financial shape than its property arm Talam. It has a total borrowing of about RM212 million, against its shareholders' fund of RM228.8 million.

Sunday, February 22, 2009

Proposal for Labu LCCT still under discussion

Proposal for Labu LCCT still under discussion BERNAMA

The proposal for a new low cost carrier terminal (LCCT) in Labu, Negri Sembilan, is still under discussion between the government and related parties, the Economic Planning Unit (EPU) director general Tan Sri Dr Sulaiman Mahbob said.
He said the government had approved the project in principle as it was viewed as a form of private sector investment but there was a need for concerned parties to study the matter with respect to all technical and safety requirements.

"This must be done and the Ministry of Transport consulted on the technical requirements," he said after delivering a talk on the current economic crisis here today.He said this when asked to comment on the current status of the proposal to set up the new LCCT.

Recently, Transport Minister Datuk Seri Ong Tee Keat said a final decision has not been made on whether to proceed with or scrap the proposal to build the LCCT in Labu. In a written reply to Loke Siew Fook (DAP – Rasah) in Parliament, he said a detailed and comprehensive study was being done to ensure that the project was feasible and would benefit the people.However, Ong said, AirAsia Bhd would have to bear the cost of building the new LCCT, as well as include connectivity costs such as road-construction and rail tracks and other infrastructure. - BERNAMA
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Thursday, February 19, 2009

PAAB to make takeover offers for Selangor water assets

PAAB to make takeover offers for Selangor water assets
By Zaidi Isham Ismail
Published: 2009/02/19

PENGURUSAN Aset Air Bhd (PAAB) will make direct offers to take over Selangor's water assets from its four concessionaires, bypassing the state government.This is because the state government has not made much progress since it was allowed by the federal government to spearhead efforts to restructure the water industry.The federal government wants to revamp the water industry by taking over all water assets in Malaysia. The industry has been plagued by funding woes, different rates across states, and various business models.People in Selangor risk paying 35 per cent more for water if the state fails to meet a March 31 deadline to transfer its water assets to PAAB.

"Any delays will cause the public to suffer as this is basic public utility," National Water Services Commission (SPAN) chief executive officer Datuk Teo Yen Hua said.PAAB, which is wholly-owned by the Finance Ministry, has been tasked to take over some of the country's water assets and liabi-lities owned by water concession companies.Selangor had offered RM5.7 billion to its four water concession companies.The four operators are Syarikat Pengeluar Air Selangor Holdings Bhd, Puncak Niaga (M) Sdn Bhd, Syarikat Bekalan Air Selangor Sdn Bhd and Konsortium ABASS Sdn Bhd.It is understood that they are not happy because the offer price is too low and they need to pay back loans.Teo said the issue has to be resolved fast as negotiations have been dragging since early last year at the expense of the people.

"The power of negotiations is in our hands and by March 31 we will start moving in and resolve issues. Right now we can't even discuss the terms which are unacceptable to the firms because we are not even involved in the negotiating process," said Teo.

Tuesday, February 17, 2009

Oil park boon for east coast

Oil park boon for east coast
By Azura

KUALA LUMPUR: The multi-billion Ringgit Tanjong Agas oil and gas and maritime industrial park project in Pekan, Pahang, is expected to create 30,000 new jobs over the next 10 years.

Deputy Prime Minister Datuk Seri Najib Razak estimated that 5,000 jobs would be created under the first phase of the project, which is scheduled to start this year."In the long run, apart from creating new economic spin-offs, the Tanjong Agas oil and gas and maritime industrial park will provide opportunities for local knowledge workers to be employed in industries from ship repair and maintenance, petrochemicals, and logistics to supplies for the oil and gas industry."

Economically, as a nation, we have to migrate from being dependent on cheap labour to remain competitive. Instead, we need to focus on upgrading our skills to cater for knowledge-based industries that require more technicians, engineers, scientists and professionals in many fields."It is my hope that the development of this maritime industrial park will take note of this and use as many locals as possible so that we can generate more employment opportunities and high-paying jobs for locals," he said at the launching of the project by Sultan Ahmad Shah of Pahang yesterday.

Present was Tengku Mahkota of Pahang Tengku Abdullah Sultan Ahmad Shah, the chairman of Tanjong Agas Supply Base and Marine Services (TASBMS) Tengku Abdul Rahman Sultan Ahmad Shah and Pahang Menteri Besar Datuk Seri Adnan Yaakob.Najib said the development of the park was timely and appropriate for the area. "Apart from being located in Pekan, its location on the east coast of Peninsular Malaysia, where the oil and gas clusters are located, will strengthen the viability of this development and spearhead more economic benefits in the east coast. "The world economic crisis, will eventually, like any other crises before us, fade away."As such, the development of the project could not come at a better time."This is indeed an opportunity for us, be it as businessmen or government, to prepare ourselves for the boom time that will come in the near future. "I believe this project could become one of the catalysts for our economic growth in this trying time." Najib also envisioned that the economic multiplier for the project would be enormous."The supporting industries around this project will come in many forms. "The benefits will flow to suppliers of equipment, financial capital and engineering services, construction, logistics, basic utilities like electricity and water, road infrastructure and many more including the creation of new townships and attracting new foreign direct investment."This development will benefit a lot of companies be it SMEs and large corporations. It is also consistent with what the government is trying to do to stimulate the economy amid the global financial crisis. "The mini-budget that will be released on March 10 will outline some of the initiatives that will generate more economic activities." He believed Malaysia could do well in the oil and gas industry just as it had been successful in the manufacturing of electronics, semi-conductors and hi-tech equipment."I do not see any reason why we cannot replicate the same success in the oil and gas industry. "As it is now, the petrochemical and oil and gas clusters that we have in Gebeng and Kerteh where Petronas and other petrochemicals companies have established their businesses are testimonies to the fact that we can be successful in this area."The development of the park is an extension of this cluster. "More importantly, this maritime industrial park can cater for the needs of regional players in Thailand, Indonesia, Singapore, Indochina and the Philippines."

The project has attracted RM6 billion worth of investment from local and foreign companies like Vantech Dockyard (M); Usatech Marine; Bitari Abadi; Core Competencies; Damini Corporation and Competent Selection.They signed a memorandum of agreement with TASBMS yesterday. TASBMS managing director Mohd Faidzal Ahmad Mahidin said the company was negotiating with more than 10 investors.He said the construction of the park would begin in the early second quarter of this year on a 1,639ha area with the project expected to be completed within the next three to four years.

Tuesday, February 3, 2009

IJM unit clinches RM545m KL project

Published: 2009/02/03

IJM Corp Bhd (3336) said its unit, IJM Construction Sdn Bhd, has won a RM544.9 million contract for a mixed development project at Jalan Pinang, Kuala Lumpur.It accepted the award from Bahagia Investment Corp (M) Sdn Bhd, IJM said in a statement posted on its website yesterday.The job involves building a 42-storey mixed commercial block comprising a 17-storey hotel, a 4-storey serviced apartment, a 13-storey office space, one level of lower ground and two levels of basement carparks.Construction will take 35 months.

About Me

A seeker of success (whatever that means) treading on a path, searching, to return to the wholesomeness that was him when he was launched into this big school called Earth.