Corporate Bail-out - for who?

To: editor@thestar.com.my

The Selangor State government recently announced that it will buy over the debts Talam Corporation Bhd has with 4 Selangor state owned subsidiaries totalling RM391m, namely Selangor Development Corporation (PKNS), Kumpulan Darul Ehsan Berhad (KDEB), Permodalan Negeri Selangor Bhd (PNSB)and Universiti Selangor (UNISEL). The vehicle used will be the state’s investment arm, Mentri Besar Incorporated (MBI) to buy over the debts owed by Talam. The State Assembly had also on 9 November 2009, approved the supplementary budget totalling to RM391m for this corporate exercise.

Defending the move, the MB of Selangor stated that MBI will ensure that Talam pays off the total RM391m within 3 months and that he was the consultant and brains behind the corporate debt restructuring. In fact, YB Azmin Ali went several steps further when he was quoted defending the move and saying that Selangor Industrial Corporation (SIC), the arm used to get the CIMB loan can settle the debt within 24 hours.

YB Elizabeth Wong also defended the move and said that the Selangor State Government wil be using the full might of the state to recover the amount that been overdue for 10 years from Talam. YB Teresa Kok defended it by saying "By consolidating Talam's debt owed to the state under the MBI it makes it easier to collect the debts and to take the necessary action to recoup the losses," she said. She also stressed that MBI has more power to act as it can seize the land and assets involved if Talam does not repay its debts to the state as a last resort.” And that the public should trust them.-Malaysiakini report.

After reading all the news reports made available, this is nothing more but a corporate bail-out for Talam Corp. Now, we have seen many bail –outs in recent days, especially in the US for their banks and major car-makers like Ford, Chrysler and so on. At the same time, the Government of Malaysia had in created Danaharta and Danamodal to buy out debts companies have with banks. But one common factor for these bail-outs – they are all for national interest to keep companies or banks with strategic national interests alive.

I wonder what strategic interest does Talam have for the Selangor State Government? And the state owned subsidiaries are not banks that will hurt their balance sheet and curtail them from doing further businesses. So exactly, why the bail-out?

If these debts had been accumulating for the last 10 years, why is the MB of Selangor and the few YBs above so confident that they can collect in 3 months. And if they can collect in 3 months, why execute all these corporate debt restructuring which will cost SIC and eventually the Rakyat RM70,000 per day in interest? What is it that they can do now that cannot be done last time. And if they know they can collect in 3 months, who go through all the exercises. If they had had the patience to wait for 10 years, just wait for another 3 months for the debts to be settled without having to do all these costly exercises.

Even under the State subsidiaries, they have the full rights through legal channels to claim for what is owed, and eventually seize assets and lands or whatever to get payment. It does not have to go through MBI to do that.

In short I am perplexed why the Selangor State government is doing this. Absolutely no concrete reason.

The Selangor State Government owes the Rakyat an answer and clarification. Or else the Rakyat will think someone benefited from the whole deal.