Talam 'bail-out' - Where is the explanation and full disclosure by Pakatan's Selangor government?

Buying off debts owed by Talam to Selangor owned companies really makes little sense... [See also earlier post:Anwar, the people were also kept in the dark when RM391 million of their money was used to buy over Talam's debt to 'Selangor'?

The Selangor MB Khalid is in the media with his intention to fully disclose the Bukit Antarabangsa report - but what about that Talam matter.

My friend Anil Netto has had some interesting things posted in his blog, which I reproduce here for your reading pleasure:-

The Selangor government’s decision to approve an additional RM391 million budget allocation to Mentri Besar Inc (MBI) to take over the debts owed by Talam Corp Bhd to three state agencies has stirred controversy.

Basically, under the move, MBI will use the money (via Selangor Industrial Corporation as a channel?) to settle the amount that Talam owes subsidiaries of Selangor Development Corporation (PKNS), Kumpulan Darul Ehsan Bhd (KDEB), Permodalan Negeri Selangor Bhd (PNSB) and Yayasan Pendidikan Selangor. The state government (via SIC?) is then supposed to recover the amount due from Talam.

While critics are viewing it as a bailout or window-dressing, Mentri Besar Khalid Ibrahim says the rationale is to ensure that Talam gives a higher priority to its debt (to the state), incurred over the last decade, ahead of its other creditors. On 10 Nov, Khalid gave Talam three months to settle the debt, incurred in connection with several property development projects. That remains to be seen.

In any case, I hope the Selangor state government will also take action against those responsible in the three state agencies who allowed such a large debt to go uncollected for so long.  What sort of security did they obtain from Talam?

Whatever the reason for the takeover of the debts, let’s take a closer look at Talam.

The Edge reported the following on 10 Aug 2009:

Talam, a township developer, has been classified as an affected company under PN17 since Sept 1, 2006, after its auditors were unable to provide an opinion on its results for its FY2006 ended Jan 31. Talam also defaulted on several of its term loans and bond obligations.
As part of Talam’s regularisation plan, the company issued a number of securities to various creditors, including the now-defunct discount house Abrar Discounts Bhd. Abrar received preference shares, loan stocks and Islamic debt securities worth RM423.35 million as settlement from Talam as part of the latter’s regularisation plan.

Profit/(Loss) before tax(at group level):

• 2009 – RM60.6 million
• 2008 – RM5.8 million
• 2007 – (RM6.9 million)
• 2006 – (RM772.6 million)
• 2005 – RM130.8 million

Talam directors (click here)

Directors’ remuneration:

• 2009 – RM1.9 million (9 directors, three of whom received more than RM300,000 each)
• 2008 – RM1.8 million

Debt (non-current liabilities) to equity ratio: 0.5 (previous year – 0.6)

Liquidity ratio (Current ratio):

• Current assets: RM1.5 million
• Current liabilities: RM2.4 million
• Current assets:Current liabilities ratio = 0.6:1 (previous year – same)

This means that its current (liquid) assets are much less than its liabilities due within a year.

“Other payables” amount to RM404.3 million.

Extract from Talam Annual Report 2009:

Other payables and accrued expenses
The obligation arising from the acquisition of land is in respect of obligations arising from the Universiti Industri Selangor (“UNISEL”) project, whereby the Selangor State Government had alienated three parcels of land to the Group in consideration for the development of UNISEL.
In 2001, Maxisegar Sdn. Bhd. (“MSSB”), a wholly-owned subsidiary, entered into an agreement with the State Government of Selangor for the financing and construction of the main campus of UNISEL on 572.16 acres of land at Berjuntai Bestari, Selangor Darul Ehsan for a total value of RM750 million. In return, the State Government of Selangor had alienated three parcels of leasehold land to MSSB as follows:
Acres RM’000
Batang Berjuntai 3,000  345,000
Taman Puncak Jalil 801  337,500
Saujana Damansara 110  67,500
Total 3,911  750,000
MSSB was unable to meet its financial obligation to bear the development and maintenance costs due of approximately RM134.0 million (“obligation due”) of UNISEL and as such, in the previous financial year, the long term portion of MSSB’s obligation under the said agreement has been reclassified to current liabilities and it has entered into an agreement with Kumpulan Darul Ehsan Berhad (“KDEB”) and Pendidikan Industri YS Sdn. Bhd. (“PIYS”) (both of which acted as nominees of State Government of Selangor) whereby MSSB agreed to settle the obligation due by transferring 1,715.9 acres of Batang Berjuntai land which the parties have agreed shall be valued for the purpose of settlement at RM80,000 per acre to KDEB and/or PIYS. The settlement agreement is pending fulfillment of certain conditions
precedent.

Substantial shareholders (based on Annual Report 2009):

(Based on Register of Substantial Shareholders as at 10 June 2009)
No. of Ordinary Shares of RM0.20 each
Direct Deemed
Name of substantial shareholders Interest %*4 Interest %*4
1. Tan Sri Dato’ (Dr) Ir Chan Ah Chye 130,769,592 6.78 854,561,543 *1 44.32
@ Chan Chong Yoon (“TSDCAC”)
2. Puan Sri Datin Thong Nyok Choo 7,493,945 0.39 977,837,190 *2 50.71
(“PSDTNC”)
3. Kumpulan Europlus Berhad 791,465,067 41.05 – –
(“KEURO”)
4. IJM Corporation Berhad (“IJM”) – – 791,465,067 *3 41.05
NOTES:
*1 Deemed interested through his spouse, PSDTNC, his daughter, Chan Siu Wei and by virtue of his interest in
Pengurusan Projek Bersistem Sdn Bhd, Prosperous Inn Sdn Bhd, Sze Choon Holdings Sdn Bhd and KEURO
pursuant to Section 6A of the Companies Act, 1965 (“Act”).
*2 Deemed interest through her spouse, TSDCAC, her daughter, Chan Siu Wei and by virtue of her interest in Pengurusan
Projek Bersistem Sdn Bhd, Prosperous Inn Sdn Bhd, Sze Choon Holdings Sdn Bhd and KEURO pursuant to Section
6A of the Act.
*3 Deemed interested by virtue of IJM holding 25% in KEURO.
*4 % shareholding based on voting share capital as at 10 June 2009 of 1,928,102,532.

On 17 July 2009, the Edge reported that Kumpulan Euro had disposed of a 9.10 per cent stake in Talam, a move which was described then as “puzzling”. - anilnetto.com, A closer look at Talam Corp Bhd

A thorough independent audit is needed on the Selangor state agencies that are owed RM391 million by Talam Corp Bhd to find out how the debt arose and who is responsible for allowing it to linger. What wonders it would reveal!

The stage agencies concerned are subsidiaries of Selangor Development Corporation (PKNS), Kumpulan Darul Ehsan Bhd (KDEB), Permodalan Negeri Selangor Bhd (PNSB) and Yayasan Pendidikan Selangor.

State agencies usually come under the purview of top Selangor government leaders, and if these debts go back a decade as has been reported, then those responsible in the previous administrations have to be held accountable.

State agencies are believed to have entered into joint ventures with Talam to develop huge land banks. It was supposed to be a “win-win situation” – but obviously something went wrong, somewhere. Talam reportedly secured large landbanks in Ampang, Sepang, Puchong, Bukit Jalil and Rawang, all prime areas.

Unaudited results for the six months ended 31 July 2009 showed that Talam posted a profit before tax of RM2.6 million, down from RM38.6 million for the corresponding period in 2008.

The Group recorded lower revenue and pre-tax profit for the second quarter ended July 2009 of RM42.0 million and RM0.3 million respectively, compared to RM61.4 million and RM2.3 million in the first quarter.

On 28 September 2009, Talam’s deputy chairman Tengku Sulaiman Shah Al-Haj Ibni Al-Marhum Sultan Salahuddin Ab Aziz Shah Al-Haj resigned.

On 14 August 2009, Talam’s Company Secretary resigned, to be replaced by a new Secretary.

On 31 July, KEuro, a major shareholder, reportedly moved to reduce its shareholding in Talam Corp Bhd, from 41.5 per cent in February to 31 per cent.

On 23 March 2009, Messrs Deloitte KassimChan tendered their resignation as the auditors of Talam and Kumpulan Europlus Bhd. A month later, an EGM was held to confirm the appointment of new auditors, Messrs Baker Tilly Monteiro Heng. The new auditors would handle Talam’s accounts for the financial year ended 31 January 2009.

According to the Edge:

Both Talam and Kumpulan Europlus had on Monday received notice of nomination from shareholders, Pengurusan Projek Bersistem Sdn Bhd and Sze Choon Holdings Sdn Bhd respectively, to nominate Messrs Baker Tilly Monteiro Heng as the auditor for both companies… According to sources, the departure of Messrs Deloitte KassimChan was based on a mutual basis and rationale behind the resignation was due to the fees structure.
According to Bloomberg data, Pengurusan Project Bersistem currently holds 2.47% stake or 47.71 million shares in Talam. Sze Choon is a company in which Tan Sri Chan Ah Chye and Puan Sri Datin Thong Nyok Choo have substantial interest in, according to Kumpulan Europlus’s FY08 annual report.

Who is Chan Ah Chye? He was a project manager at PKNS in the early part of his career.

He has over 37 years of experience in the property and construction industry since he started his career with Messrs Binnie & Partners (M) Sdn Bhd and later joined Perbadanan Kemajuan Negeri Selangor (”PKNS”) in 1971 as a Project Manager handling project designs, management and property development. Tan Sri was awarded the prestigious “Property Man of the Year 1998” by Federation Internationale Des Professions Immobilieres (“FIABCI”) in recognition of his achievements in property development. Tan Sri was conferred the Honorary Doctorate of Science (Engineering) by the University Malaya on 11 August 2003. He is also currently an Executive Director (President/ Chief Executive) of Kumpulan Europlus Berhad.

Chan is the spouse of Thong, a major shareholder of Talam.

In December 2008, Talam was served with a winding up petition after the Malaysian government obtained judgment for over RM10 million against one of Talam’s subsidiaries for corporate taxes dating back to 1998-1999. Talam announced it would be meeting with the tax department to work out a mutually acceptable settlement scheme. The winding-up petition was withdrawn a month later.

Clearly, it has been a troubled past year. - anilnetto.com, Talam debt: Audit needed on state agencies

What disturbs me is that this had to go through the State Legislative Assembly, and the Pakatan Rakyat ADUNs voted for it.

Did they question it? Were they allowed to question it - remember that the BN's position has been that their representatives should not oppose or question what has been tabled before Parliament - just vote for it?

Is the Pakatan Rakyat reps, i.e. the said ADUNs, also doing the same - just vote do not question anything...

I would like to read the minutes of the Selangor State Assembly (i.e. like the Hansard for the Parliament, which is found in their website) - but I believe that we cannot get the State Legislative Assembly Hansards on the web. Tell me if I am wrong - for we really need to consider the debate before voting to see who questioned it, the answers given and who just 'blindly' voted for it - RM391 million of the people of Selangor's money 'wasted' like that..

Did Selangor acquire shares in Talam by this move? Or just an assurance of ... what? Did the Talam Directors and CEO take pay-cuts?

Was the Talam Debt guaranteed by personal guarantees of the Directors and principal shareholders? ....questions questions questions...