Najib Razak / Politics in general / Socio-economy / Umno & Barisan Nasional

1MDB – prematurely ejaculating in public, then blames everyone else for it

Arul Kanda has done it again. This time all the so called ‘success’ in selling off the national assets just to pay off the billions of loans they could not repay was quickly negated by their Chinese buyer merely 4 days after the ‘big announcement’. Again and again, 1MDB is exposed as a dishonest company whose words cannot be trusted.

China Railway Group, whose subsidiary the China Railway Engineering Corporation (M) Sdn Bhd had announced that they will only pay RM2.64 billion of the total RM5.28 billion selling price of the Bandar Malaysia equity.

This ran contrary to the statement 1MDB had earlier made:

The 1Malaysia Development Berhad Group (“1MDB”) today executed a Share Sale and Purchase Agreement to sell 60% of the equity in Bandar Malaysia Sdn Bhd (“BMSB”) to a Consortium comprising Iskandar Waterfront Holdings Sdn Bhd (“IWH”) and China Railway Engineering Corporation (M) Sdn Bhd (CREC).

The IWH-CREC Consortium has valued 100% of the Bandar Malaysia land at RM 12.35 billion. Accordingly, its 60% share of land will cost RM7.41 billion. 1MDB will receive a 10% deposit of RM741 million upon execution of the Share Sale and Purchase Agreement, with completion of the transaction expected by end June 2016. 

The selling price if we were to take 1MDB’s announcement is fixed, which is supported by RM741 million as 10% deposit upon signing the S&P agreement.

There is no doubt that the public would have understood that the final selling price is indeed RM7.41 billion. There was no mention that the amount will be adjusted. And of course, in their earlier statement, they had explicitly mentioned that the RM7.41 billion is on the sale of equity in Bandar Malaysia Sdn Bhd (BMSB); which owns 486 acres (approximately 2 million square metres) in Sungai Besi – land originally owned by the Government.

Certainly CREC also did not mention that the RM5.28 billion was on land valuation. It specifically said:

On 31 December 2015, the Joint Venture entered into the Share Sale Agreement with 1MDBRE, pursuant to which the Joint Venture will purchase 60% of the equity interest in BMSB held by 1MDBRE at a price of MYR5.279 billion, among which CRECM will pay MYR2.639 billion (equivalent to approximately to RMB3.995 billion) of the share purchase price.

Then, why on earth did 1MDB today suddenly release a press statement saying that “the valuation contained in the announcement made by CREC to HKEx refers not to the land sale valuation, but instead to their estimated share of the net equity value of the Bandar Malaysia project, based on certain assumptions, which are subject to further negotiations during the Completion period between January and June 2016.”?

Well, duh..

That was precisely why the public was asking the question – Why did you announce a different figure in the sale of equity from what CREC had approved and committed by their Board of Directors on 31st December 2015?

Unless 1MDB did not receive the memo or their corporate communications staff were probably too drunk during the new year’s eve festivities, here is the copy of CREC’s announcement:

crec

It seems RM5.28 billion is the total and the final amount agreed by the Board of Directors in China Railway Group , the parent company of CREC, of which 50% of it (RM2.64 billion) will be paid by them to 1MDB.

Is 1MDB effectively saying that CRG had misled the Hong Kong regulatory bodies?

Or did 1MDB had misled its stakeholders – the Malaysian public by furnishing unverified amount? But in their statement, they blamed other people in questioning the discrepancies of figures. What kind of public relations strategy is 1MDB trying to execute?

On another note, why is CRG paying 50% of the purchase price when their ownership in the Consortium is said to be only 40%? This is another mystery which 1MDB will almost definitely label it as ‘this is just a recycled allegation so we won’t bother answering it’.

If ever there was a case study in crisis management, 1MDB’s corporate comm department should be set as an example on ‘things a company should not do in public relations’.

Now before anyone gets confused, the Chinese company and its partner, IWH is buying 60% ownership of BMSB. That means it has the majority control and ownership of the whole 486 acres of land in Sungai Besi.

They did not buy 60% of 486 acres. They bought to become the majority owner of that whole 486 acres of land in Sungai Besi. Can you imagine the size of 486 acres of land?

fa2b8a109fcb4a01a0ccb2e8646b0a51

It is huge.

In order to appease the ignorant public, 1MDB and their army of paid sycophants had the cheek to say that the majority shares in Bandar Malaysia will still be owned by the Government. This is again, misleading.

Lets look at the ownership of Bandar Malaysia now:

40% – 1MDB

60% – CREC & IWH Consortium

Majority of Bandar Malaysia is now in the hands of private sector.

Breakdown of CREC & IWH Consortium:

40% – CREC

60% – IWH

Majority of the Consortium is owned by IWH, a private + Johor state venture.

Breakdown of IWH, the controlling company in the Consortium:

60% – owned by Lim Kang Ho via Credence Resources

40% – owned by Kumpulan Prasarana Rakyat Johor Sdn Bhd

Therefore, in reality, Lim Kang Ho owns the controlling stake in Bandar Malaysia Sdn Bhd. And since he is the private sector and controls the majority shares in IWH, what will stop him from selling more shares to foreigners? Obviously 1MDB and Kumpulan Prasarana Rakyat Johor Sdn Bhd are insignificant shareholders in this deal.

Lim Kang Ho through his Credence Resources can easily team up with CRG and swallow the whole BMSB.

This is why the public have asked 1MDB to disclose its Sale and Purchase agreement because it is a matter of public interest but 1MDB quickly dismissed it as an attempt to ‘undemine’ the sale. Such siege mentality had not been witnessed since Troy was ransacked by the Greeks.

What is the guarantee that the whole Sungai Besi land won’t fall into the hands of foreigners? The risks are there but to 1MDB and its top advisor, since the land they are selling is only belonged to the public but not their own, it is okay to sell it off, just so that they could pay off their debts.

This is just like the case of Edra Global Energy where they sold it to foreigners on what was once belonging to Malaysians and the Government. 1MDB is just selling off their assets just to pay back the loans they have massively and wastefully acquired.

But of course, the idiots in Umno will not understand the consequences. Not even the once boisterous Pemuda Umno made a squeak. Perhaps they are more busy chatting in Whats App groups as which Pemuda exco should be made a minister in the next Umno/General elections.

Three malay stooges laughing while selling away the Sungai Besi land while the Ambassador from China and owner of IWH smiled

Three malay stooges laughing as they sell away the Sungai Besi land while the new land owners smiled

Usually when we hear people selling off their assets (houses, cars, land) just to pay off their gambling debts, we would not have imagined it would be on a huge national scale. This usually happens to commoners which had made bad decisions in life, and had fallen into difficult times. Destitution due to gambling debts is not uncommon.

But in the case of 1MDB, they asked people to be with them and to support them as they sell off all the crown jewels just to keep afloat. We would have expected 1MDB to pay off their debts via their profits. But at the end of the day, they had mismanaged their debts, caught themselves in financial distress, unable to fulfill all their original objectives when they set up the company, forced to admit that the company is a failure with the business model being too idealistic but, eventually had shamelessly telling the public that the process of selling off national assets just to pay off their debts is a success!

Truly, why do we deserve this kind of leadership?

P.S.: As predicted, a nameless sychophant threw in his only defence against this article – that Malaysian Government holds the majority stake in Bandar Malaysia.

To summarise this is their argument:

1. CREC 40% of 60% is 24%
2.. LKH 60% of 60% of 60% is 21.6%
3. KPRJ 40% of 60% of 60% is 14.4%
4. 1MDB 40%

Therefore, Malaysian government still own 54.4% (40% + 14.4%) of Bandar Malaysia. This is just like how 1MDB tries to hoodwink the public. But just as the article above shown, this is not the case.

It doesn’t work that way in corporate world.

As explained in this article, Lim Kang Ho controls the Board of IWH through his majority shareholding thus effectively controls the Consortium because IWH has 60% of ownership. Since he controls the Consortium, he controls the Board of BMSB. Doesn’t matter who owns how much percentage. Amateurs will look at the percentages as if they mean something. In reality the one that controls the BOD at each level of the company holds the power. How can 1MDB with only 40% ownership exert control over BMSB? And how can Johor state with only 40% stake in IWH exert control over IWH? In addition, it has much less say in CREC-IWH! In conclusion, the formulation that Malaysian government owns 54.4% of Bandar Malaysia is just an illusion.

You might also want to read:

1) China Railway Sebut Angka Berbeza Nilai Bandar Malaysia – Mohon 1MDB Perjelaskan

2) Sat Dee’s opinion on the discrepancy

3) Congrats for selling our prized jewels just to pay off 1MDB debts!

4) Bandar Malaysia deal: China Railway Engineering does not admit to paying RM7.14 billion, or being party to sale ,while Arul & Kang Hoo agree that payment will be “deferred”

5) Hutang RM46 Billion, Jual Bandar Malaysia RM7.41 Billion.. Najib Kata Isu 1MDB Dah Settle?

6) SELEPAS SATU DEMI SATU DIJUAL, APA BISNES 1MDB SELEPAS INI?

7) What can Johor Umno gives to Johor Pas?

8) Dear Annie, Again…

9) 1GDB IN SHAMEFUL TATTERS! SHAMBOLIC EXPLANATION FOR SCREW UP ON $7.41 BILLION DELIBERATELY MISLEADING ANNOUNCEMENT BY SERIALLY LYING PM GROSSMAJIB, 1GDB & CEO ARUL KAUNDA KUNDI!

25 thoughts on “1MDB – prematurely ejaculating in public, then blames everyone else for it

    • i’m not 1MDB fan lah brader and it is only me, nobody else here. lol, my remark was merely questions (i.e. ?), and you clarified. i thought the representative of BOD at the new consortium will be relative to the breakdown of the ownership percentage. thanks

      cheers,
      ./mkh

      Like

      • Hi MKH,

        Was not referring to you, but the anon which commented after you. Can be seen in the link we provided in the paragraph. But we did use your calculation as a summary for easy reference. Apology for the misunderstanding. And yes BOD representative in the Consortium (usually) will be relative to the shareholding ownership. Thus, IWH has the bigger BOD representative.

        Thank you.

        Like

  1. Aiyooo, how the hell you messed up with that calculation Jebat, you heart so bloody black that you can’t even see properly. 60% of Bandar Malaysia is own by consortium, out of that 60% basically 36% is own by China railway which would translate to roughly 25%, and out of 60% of the 60% is by IWH, which is 60% is Lim Kang Ho and 40% Prasarana, so basically Lim Kang Ho only holds roughly 21% of the shares while Prasarana holds 14%. Hence, basically if you put it in proper perspective, 40% hold by 1MDB, 14% hold by Prasarana, 21% by Lim Kang Ho, 36% is by China Railway. Basically anything that happen need to be agreed by all the share holders, hence, Malaysia holds more than 50%. Malaysia is the Majority holder. Why the eff do you think it differently?

    Like

    • It doesn’t work that way in corporate world.
      As explained in the article, Lim Kang Ho controls the Board of IWH through his majority shareholding thus effectively controls the Board of the Consortium since IWH has 60% of ownership. Since he controls the Consortium, he controls the Board of BMSB. Doesn’t matter who owns how much percentage. Amateurs will look at the percentages as if it means something. In reality the one that controls the BOD at each level of the company holds the trump card. How can 1MDB with only 40% ownership exert control over BMSB? And how can Johor state with only 40% stake in IWH exert control over IWH? It has much less say in CREC-IWH! Please re-read the article.

      Thank you.

      Like

      • In reality the one that controls the BOD at each level of the company holds the trump card. How can 1MDB with only 40% ownership exert control over BMSB? And how can Johor state with only 40% stake in IWH exert control over IWH?

        Exactly.

        Correct.

        Like

        • Controlling interest can also be achieved with less than 50% ownership of the stock if that person/group owns a significant proportion of the voting shares, because in many cases, not every share carries a vote in shareholder meetings.

          Like

        • Therefore, Malaysian government still own 54.4% (40% + 14.4%) of Bandar Malaysia. This is just like how 1MDB tries to hoodwink the public. But just as the article above shown, this is not the case.

          It doesn’t work that way in corporate world.

          As explained in this article, Lim Kang Ho controls the Board of IWH through his majority shareholding thus effectively controls the Consortium because IWH has 60% of ownership. Since he controls the Consortium, he controls the Board of BMSB. Doesn’t matter who owns how much percentage. Amateurs will look at the percentages as if they mean something. In reality the one that controls the BOD at each level of the company holds the power. How can 1MDB with only 40% ownership exert control over BMSB? And how can Johor state with only 40% stake in IWH exert control over IWH? In addition, it has much less say in CREC-IWH! In conclusion, the formulation that Malaysian government owns 54.4% of Bandar Malaysia is just an illusion.

          Hurm, Since Lim Kang Ho is the majority share holder even in between consotium who he himself is a Malaysian, then why do you guys bising that it was sold to foreigner? Isn’t it almost like what Gov do for example in Plus during the time Dr M, having minority share in the company through privatization to UEM. UEM later was bought by Khazanah. Basically the whole exercise done by 1MDB at least was an open tender, given to the highest bidder. And as you said Lim Kang Ho is the majority shareholder then why should it be of concerned? All the more I think less of a problem. And you assumed that Credence would team up with CRG, then shouldn’t the opposite be true to that Prasarana will team up with Credence. Lim Kang Ho have more reasons and benefit and also self-interest to partner up with Prasarana then CRG.

          Like

          • Going roundabout with some irrelevant examples and missing the point again? Regardless, you assumed Lim Kang Ho won’t team up with CRG? What you need to confirm your assumption is the disclosure of the S&P and the Shareholding agreements. Hopefully you can ask your friends in 1MDB to do it. You have every right to know.

            Thank you.

            Like

          • So bagusla open tender ni? Kalau Americans came and bid with the highest tender, Najib pun terus accept la?! Kalau they all came and bid for rm15 billion, terus 1mdb cium tangan diorang sebab happy dapat bayar hutang? Walaupun tanah rizab melayu yang dulu milik kerajaan (rakyat) dah jadi milik swasta atau orang asing? Bodoh ke apa?

            Like

      • take a look below and please re-consider …..🙂

        “A shareholder has controlling interest in a corporation if the shareholder has a majority of the voting shares of stock in that corporation. Having controlling interest means that the owner of the controlling shares can control any decision made by the shareholders and override any other shareholder opinions or votes. Depending on the bylaws of the corporation, a two-thirds interest may be required to pass any motion.

        In this case, controlling interest would be 34 percent of the votes (preventing two-thirds vote by any other person or group).”

        Like

        • Yes, thus Lim Kang Ho has the controlling interest at all levels, as explained in the earlier comment. Some shareholding agreement/corporate bylaws do not even need two thirds majority.

          Thank you.

          Like

  2. Say “hello” to the new de facto owner of the bigger chunk of Bandar Malaysia:

    http://www.forbes.com/profile/lim-kang-hoo/

    “Lim Kang Hoo’s net worth drops by nearly 40%. Nearly all of his wealth is tied up in the giant Iskandar property development across from Singapore, and slowing demand and fears of a glut are hurting values there. He’s a co-founder and executive chairman of Ekovest, a civil engineering and construction outfit that controls Iskandar Waterfront Holdings, master developer of 4,000 Iskandar acres.”

    If Mr Lim plays his cards right, he avoids the glut in Iskandar by taking on a piece of junk off a desperate 1MDB. The bigger prizes are yet to come – the fabrication of the high-speed link to Singapore, the building of properties to take advantage of that. Ekovest & the China group will have planned well ahead.

    Well played, Mr Lim.

    Less well played, 1MDB.

    Like

  3. The shareholders of Bandar Malaysia project as well as CREC and IWH consortium should have their own sets of Shareholders’ Agreement. All the Shareholders’ Agreements should also be disclosed to the public as it may determine the roles of each shareholder including the ultimate control in the project.

    The shareholders may sign the shares’ option agreements with each other and such agreements should also be disclosed to the public. For example, does CREC has the option to buy the shares held by IWH?

    Like

  4. Pingback: 1MDB – prematurely ejaculating in public, then blames everyone else for it | ajai62

  5. Would there have been so much angst if the controlling shareholder of IWH is an ethnic Malay?

    I suspect that there would have been a lot of congratulatory backslapping and high-fives that an ethnic Malay has been able to pull off this feat of corporate restructuring.

    But, alas, an ethnic Chinese got involved.

    Cue in the subsequent witch hunt…..

    Like

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