10 April Zarinah Anwar Deputy Chief Exeutive Securities Commission

Transcription

1 10 April 2002 &RUSRUDWH5HVWUXFWXULQJ LQ 0DOD\VLD Zarinah Anwar Deputy Chief Exeutive Securities Commission

2 q Background to corporate distress 2XWOLQH q Corporate restructuring: key institutions q Recent developments

3 Principal reasons behind corporate distress Decline in Stock prices Currency Depreciation Corporate Distress Funding Mismatches Depressed Demand for Goods & Services 3

4 KLCI 1,400 1,200 1, Ringgit equivalent to US$1 Jan-97 Feb-97 Mar-97 Apr-97 May-97 Jun-97 Jul-97 Aug-97 Sep-97 Oct-97 Nov-97 Dec-97 Jan-98 Feb-98 Mar-98 Apr-98 Index points MYR/USD exchange rate (LHS) Start of crisis KLCI (RHS)

5 Indicators of corporate distress Registry of Companies reported ½4,776 out of 474,659 companies in existence in 1998 were dissolved ½152% increase in dissolutions in 1998 compared to 1997, while dissolutions in 1997 were 179% higher than in Corporate Debt Restructuring Committee (CDRC) ½As at June 1999, CDRC received 60 applications involving corporate debts amounting to RM32.5 billion. 5

6 Immediate measures Against the backdrop of the crisis and subsequent economic recovery, the Government recognized: Corporate restructuring and corporate recovery necessary Appropriate efforts had to be directed towards restructuring distressed companies Immediate measures introduced included: Lowering statutory reserve ratio to reduce cost of funds and ease lending rates; Pegging of ringgit at USD3.80 Exit levy on repatriation of capital and profits 6

7 q Background to corporate distress 2XWOLQH q Corporate restructuring: key institutions q Recent developments

8 Key institutions behind corporate restructuring Government of Malaysia National Economic Action Council Bank Negara Malaysia Securities Commission Pengurusan Danaharta Nasional Danamodal Nasional Corporate Debt Recovery Committee 8

9 National Economic Action Council The NEAC was established on 7 January 1998 as consultative body to the government to deal with the economic crisis that had arisen Objective: ½ To prevent economy from going into recession ½ To reduce effect of declining ringgit and share prices on the real economy ½ National Economic Recovery Plan 9

10 Bank Negara Malaysia Central bank responsible for, among others: ½ Monetary policy ½ Exchange rate policy Facilitated the process of bank restructuring Led the establishment of restructuring agencies: Danaharta & Danamodal 10

11 New institutions established 3 new key institutions were established to spearhead efforts in corporate restructuring. Danaharta To remove nonperforming loans (NPLs) from the banking system; To maximise the recovery value of the acquired assets Danamodal To recapitalise banking institutions and serve as a catalyst to consolidate and rationalise the banking sector Corporate Debt Restructuring Committee (CDRC) To provide the forum for debtors and creditors to work out their debt problems without having to resort to the legal process 11

12 Danaharta Government announced intention to set up Danaharta in May 1998 Commitment of government reflected in speed Danaharta was established: ½ Incorporation of Danaharta in June 1998 ½ Danaharta Bill passed by Parliament by August 1998 ½ Danaharta Act received Royal Assent on August

13 Danaharta Statutory power (Danaharta Act 1998) to acquire NPLs from financial institutions Rehabilitation and value maximization of loan assets acquired Commenced primary carve-out of NPLs in September 1998 Danaharta acquired 40% of banking system s total NPLs of end November 2001 As at 31 December 2001: ½ Danaharta s portfolio of NPLs totaled RM47.72 billion ½ RM47.69 billion of NPLs restructured or approved for restructuring ½ Recovered RM15.17 billion ½ Completed first securitisation exercise of its performing loans in 1 st Q 2002 ½ Will now focus on implementing approved recovery strategies until its targeted closure date of

14 Danamodal Recapitalize financial institutions Complementary role to Danaharta 14

15 Danamodal Core processes ½ Injected RM7.59 billion into banking system ½ Banks repaid RM5.45 billion (7 out of 10 banks) ½ 2 became anchor banks 15

16 CDRC Broad objectives: vto minimise losses to creditors, shareholders and other stakeholders through voluntary coordinated workouts; vpreserve viable businesses suffering during the adverse economic conditions and, hence, jobs; and vto implement a comprehensive and best practice framework for debt restructuring 16

17 CDRC s approach Eligibility for CDRC assistance: Total aggregate debt of approximately RM100 million or more from at least 5 creditor banks Company not in any insolvency administration 5 stage work-out process 17

18 CDRC s achievement to date Significant progress in 4 th Q 2001; new initiatives announced Resolved 37 cases with debts amounting to RM34.5 billion since its inception in 1998 to December 2001, out of 63 cases with debts of RM RM56.7 billion As at 31 December 2001, 12 cases with debts amounting to RM18.0 billion remain outstanding Going forward, CDRC targets to resolve the remaining cases by 31 July

19 SC s role Facilitate restructuring proposals from listed companies Drive restructuring of market intermediaries (stockbroking companies) 19

20 SC s regulatory purview Restructuring activities under the regulatory purview of SC ½ Securities Commission Act 1993 Forms of restructuring requiring SC approval include: ½ Capital raising ½ Schemes of compromise, arrangement, amalgamation or reconstruction ½ Takeovers and mergers ½ Acquisition and disposal of assets 20

21 Facilitative measures introduced Less stringent profit requirement for assets to be injected extended to all distressed listed companies, instead of only to rescue cases Requirement for postrestructuring NTA position for distressed company reduced from at least 50% of par value of shares to 33% Extend exercise period of warrants All distressed listed companies allowed to issue convertible securities with nominal values below RM1.00 Fund raising in form of rights issues allowed to be undertaken on minimum subscription basis Companies can choose not to submit profit forecast duly reviewed by external auditors, but only endorsed by directors (except for IPOs/reverse takeovers) 21

22 SC s approval philosophy v Proposal comprehensive v Assets that are to be injected are to be of a reasonable quality v Promoters of proposal to have proven track record of good corporate governance v Proposal fair to all parties concerned v Proposal does not have adverse impact on capital market in general 22

23 Broker scheme SC embarked on comprehensive scheme in August 1998 involving Danaharta ½ To ensure recapitalisation and regularisation of the financial position of distressed brokers ½ Overall strengthening of the industry ½ Help banking sector overcome loan exposure SC set up special task force, included representatives from Danaharta and KLSE Process: ½ 1 st phase: Danaharta acquire NPLs from industry ½ 2 nd phase: Danaharta proceeds with recovery procedures, including appointment of Special Administrators in consultation with SC A reimbursement scheme for affected clients was introduced 23

24 Broker scheme results Progress encouraging Of the 11 SBCs brought into Scheme: á 5 SBCs were acquired, converted into branch offices á 5 SBCs improved their financial positions through workout proposals á To date, only 1 SBC remains under Special Administrators 24

25 Consolidating stockbroking industry As follow-up to earlier initiatives to encourage mergers among SBCs and to strengthen industry as a whole to: Develop more robust SBCs Form core group of wellcapitalised SBCs known as Univeral Brokers Enhance risk management capabilities, widen range of services Total number of SBCs 47 Universal Broker status granted to 5 SBCs 25

26 q Background to corporate distress 2XWOLQH q Corporate restructuring: key institutions q Recent developments

27 UEM-Renong Government made offer to take over company in July 2001 Debts of company estimated at RM30 billion Favourable market response á KLSE among best performers in Asia in 3 rd Q 2001 before 11 September 700 Index points Danasaham makes offer for UEM KLCI Jun 11-Jun 21-Jun 1-Jul 11-Jul 21-Jul 31-Jul 10-Aug 20-Aug 30-Aug 27

28 MAS Government pushing ahead with restructuring national carrier Malaysia Airlines 4.50 Share price (MYR) Sep MAS announces restructuring plans MAS share price 1.50 Sep-01 Oct-01 Nov-01 Dec-01 Jan-02 Feb-02 28

29 KLSE actions Practice Note 4/2001 Criteria & Obligations pursuant to para of Listing Requirements: ½ Took effect Feb 2001 ½ Minimum standard of financial condition for listed issuers ½ Compels affected issuers to regularize financial condition ½ Monthly reporting of financial health ½ Hasten pace of restructuring ½ Risk of delisting New measures in March 2002: ½ Affected issuers placed under new sector called PN4 Condition ½ Trading restrictions imposed on 43 PN4 companies 29

30 7KDQN<RX Securities Commission