“The 1997 Asian Financial Crisis and the monetary policies put in place by Mahathir, as the prime minister, had the effect of isolating the country, in particular from foreign investors,” Halim said in his statement in reply filed on Monday.
Halim had filed a suit against Mahathir and two other defendants in July over a government takeover of his holdings in the Renong-UEM group in 2001. He also named Nor Mohamed Yakcop and the federal government as defendants.
In their defence statement filed previously, the defendants said the takeover followed the weak performance of Renong and UEM shares during the 1997 crisis, which dragged down the stock market due to the group’s huge market holdings.
“Under the management of the plaintiff (Halim), the market capitalisation of the Renong Group declined by 41%, from RM7.2 billion in 1997 to RM4.2 billion in 2000,” the defence read.
‘Renong management sound’
Halim, however, denied the defendants’ contentions and asserted that his management of Renong had been sound.
The Renong group under his management, he said, was one of the most successful Bumiputera-owned groups prior to the government takeover.
“Out of the six Bumiputera-controlled companies in the top 30 listed companies (by market capitalisation) in 2001, half were controlled by me,” said Halim.
He also denied that his management of Renong had resulted in the group’s market capitalisation declining from 1997 to 2000.
On the other hand, he argued that the decline was in line with the overall stock market downturn precipitated by the 1997 crisis.
Instead, he said the then prime minister should be blamed for aggravating the adverse impact of the financial crisis.
He referred to the slew of policies implemented by the Mahathir administration to contain the 1997 crisis, such as the artificial peg of the ringgit at 3.80 to the US dollar, the restriction on companies declaring and paying dividends, and the shutting down of offshore ringgit transactions.
Halim also mentioned the political instability caused by the arrest and subsequent prosecution of the then deputy prime minister and finance minister, Anwar Ibrahim.
“The said events preceding it, including the 1998 attack on the judiciary, gave rise to an impression that the federal government was not concerned with the rule of law,” Halim said in his reply to the defence.
Debt level sustainable
The defendants highlighted that Renong had a debt totalling RM26 billion during the peak of the 1997 Asian Financial Crisis, which constituted 7% of the entire banking system at the time.
Halim, however, argued that the debt level was manageable in spite of its large magnitude.
“Though Renong had large debts, the Corporate Debt Restructuring Committee (CDRC) had expressly indicated that the debt-restructuring could be carried out without any financial support from the government,” he said.
The CDRC was set up by the government following the 1997 crisis to help companies work out feasible debt restructuring with their creditors without having to resort to legal proceedings.
“Further, the CDRC had stated it was confident that significant value could be extracted over the coming years from Renong’s asset portfolio,” he said.
At the time, Renong’s portfolio included Commerce Asset-Holding Bhd (now CIMB Bank), Ho Hup Bhd, Kinta Kellas Bhd, Cement Industries Malaysia Bhd, Pharmaniaga Bhd, Time Engineering Bhd, Time dotCom Bhd, ParkMay Bhd, Faber Bhd, Crest Petroleum Bhd, EPE Bhd and Intria Bhd.
All of these companies were listed on the stock exchange.
“Under the CDRC’s proposed scheme, Renong’s debt was ultimately resolved via the issuance of RM8.4 billion bonds by PLUS in September 1999 which were given an A3 rating from RAM Ratings.
“This rating was maintained in November 2001 with PLUS having a net present value (NPV) cash flow of RM25 billion. These were indicative that PLUS was not in financial distress,” he said.