Talam for Dummies
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COMMENT “Confusing” probably describes most of our initial attempts to get to the bottom of what the deal was between Talam Corporation and Selangor.
With a little diligence, clear thinking and attention to detail however, most mysteries can be unravelled and articulated efficiently.
This article attempts to explain in easy to understand terms the background and context of this issue, how Selangor recovered the debt owed to it by Talam, and how this debt recovery differs from the bailouts we have seen at the federal level.
In the beginning
The story begins in the late eighties and early nineties, with an engineer and project manager who worked in Selangor state subsidiary PKNS - one Chan Ah Chye.
This man later goes on to form Talam Corporation, and before long - possibly due to close connections with the ruling elite in Selangor, then headed by BN menteri besar Muhammad Muhammad Taib - becomes a major player in the Selangor property and development scene.
Over time, an extremely large amount of state land is alienated to Talam, who basically gets it for free. A strong imagination is not required to speculate in whose pockets any resulting profit eventually ends up.
Talam’s modus operandi seems to be to pledge this land to the bank in exchange for huge loans, which they then use to finance their development and profit making projects. In essence, since they got the land free, they have successfully achieved money for nothing (it is uncertain as to whether “chicks for free” were involved).
The ‘wise’ businessmen of that era believed in the dictum of never using your own money when you can use someone else’s. This heavy lending continued to characterise Talam’s business approach, and their loans consistently kept getting bigger and bigger.
Tumbling down
Of course, no student of recent economic trends is unfamiliar with the concept of a bursting bubble.
The financial collapse of the late nineties brings Talam’s debt-ridden house of cards crashing down. An overgearing of loans and inability to service them halts various half-completed projects, rendering them idle, half-built ruins.
I
ncredibly however, this does not prevent Talam and their political patrons from altering their basic modus operandi.
In 2001, under BN menteri besar Khir Toyo (right), three parcels of land are alienated by Selangor to Talam via their subsidiary Maxisegar Sdn Bhd, who undertakes to construct Unisel’s campus at an estimated cost of RM750 million.
It will probably come as no surprise that Talam failed to complete this project. By September 2006, the company had been classified as an affected company under Practice Note 17 (PN 17), indicating dire financial straits.
New sheriff in town
In 2008, when Khalid Ibrahim assumes the menteri besar’s post, he inherits a situation in which Talam owes the state and its subsidiaries (among other creditors), a great deal of money.
Urban legend has it that when Talam was called in to explain why they have never endeavoured to pay their debts, the sheepish reply given was, “No one ever asked us to.”
Thankfully for the citizens of Selangor, there was a new sheriff in town.
Corporate finance is not only an area of expertise for Khalid (left) - it is a passion. With great gusto, he set out to solve this problem, and recover that which was owed by Talam to the people of Selangor.
The problem was undoubtedly challenging, but after some work and careful strategising, a plan was set into motion.
The end goal was simple: to leverage the assets still held by Talam to repay the debt Talam owed to the Selangor and its state subsidiaries.
The technical nitty-gritty
Making this happen was a technically complicated process that required considerable financial acumen.
The summary is this: firstly, the debts that were owed by Talam to Selangor state subsidiaries were properly booked and accounted for - something that, very suspiciously, had not been done before. Once these debts were acknowledged by all parties, the debts were consolidated and transferred to one state subsidiary - Menteri Besar Incorporated (MBI), which was then responsible for collecting the debts from Talam in the form of land and cash.
The rest of this section explains how this was done. It is a boring and complex explanation, but I list it here for the record and for those interested.
Talam owed RM392 million in debt to three Selangor state subsidiaries: KHSB, PIYSB, and PNSB. After acknowledging and booking these debts, the next step was to have another state subsidiary, Selangor Industrial Corporation (SIC), purchase these debts from the other three companies.
A loan from CIMB Bank of RM 392 million was given to SIC to complete this purchase. In November 2009, the state exco and legislative assembly both approve a grant of RM392 million to MBI, who then use the funds to purchase the original consolidated debt from SIC. SIC then uses those funds to pay off their CIMB loan.
The end result is as simple as the transaction itself is complex - without any major or excessive transactional expenses, Talam now owes the same amount of money to just one state subsidiary, instead of the original three.
Restructuring and successful collection
It is important to note that at no point are funds transferred from taxpayer monies to Talam. Funds have instead only been transferred from one pocket of the state to another.
This differs wildly from federal bailouts of corporations like Indah Water Konsortium, MAS, or the Putra/Star LRT, where taxpayer money was injected directly into companies that had probably lost untold amounts via mismanagement, corruption and plundering.
The transfers in the Talam debt restructuring allowed for a structure in which there is a clear acknowledgement and accounting for the RM392 million owed by Talam, and a single company for them to pay it to.
The story does not end there.
Another extremely important milestone in this tale is that MBI has in fact already succeeded in recovering all RM392 million in debt owed by Talam.
For those who would like to keep score, this recovery came in two forms.
RM340.88 million was recovered via acquisition of land and assets: 1,322 acres of land in Bukit Beruntung worth RM150.28 million, 2,264 acres of land in Bestari Jaya worth RM105.3 million, 400 acres of land in Ulu Yam and 60% equity in Ulu Yam Golf & Country Resort worth RM22.2 million, 134 acres of land in Danau Putra worth RM52.1 million and five office units in Menara Pandan worth RM11.1 million.
The remaining RM51.12 million was collected in cash: RM12 million from sales of land in Puncak Jalil, RM5 million in cash assignments from EON, RM7.68 million in payments by Unisel for earthworks, RM9.04 million from the sale of 25.94 acres of land in Bukit Beruntung, and RM17.4 million from sales of 218 acres of land in Bestari Jaya.
Go ahead, count it - it's all there.
Facts trump hype - again
How can we summarise this? For more than a decade under BN, one corporation owed the state hundreds of millions of ringgits.
Within a year or two of taking over, Khalid managed to collect on these debts, instantly increasing the amount of money available to spend on welfare programmes throughout Selangor.
Scandal?
Yes, it’s a scandal that Talam was allowed to get the free lunch it did under BN, and it’s a scandal it took this long for to create the change in government that succeeded in cleaning up the mess.
I
t would be insulting to suggest that this article is titled specifically in the hopes that Chua Tee Yong (left) would take the time to carefully peruse the facts within. Nevertheless, perhaps he may find the exercise beneficial in his longer term efforts to maintain what little credibility he has left.
Said credibility is shrinking at about the same rate at which he is reducing the amount of money claimed to be ‘misused’ by Selangor - from RM1 billion, to RM260 million, to RM42 million. Before long, he may have to measure in sen instead.
Perhaps Chua fancies himself a Rafizi Ramli. What he fails to understand however, is that Rafizi’s exposes are not just all about ‘glamorous’ press conferences and big numbers. Behind every expose is a ton of hard work and solid research.
Behind Chua appears only to be blind ambition that extends far beyond ability, and a shameful mainstream media that think that hype can overturn facts.
With a little diligence, clear thinking and attention to detail however, most mysteries can be unravelled and articulated efficiently.
This article attempts to explain in easy to understand terms the background and context of this issue, how Selangor recovered the debt owed to it by Talam, and how this debt recovery differs from the bailouts we have seen at the federal level.
In the beginning
The story begins in the late eighties and early nineties, with an engineer and project manager who worked in Selangor state subsidiary PKNS - one Chan Ah Chye.
This man later goes on to form Talam Corporation, and before long - possibly due to close connections with the ruling elite in Selangor, then headed by BN menteri besar Muhammad Muhammad Taib - becomes a major player in the Selangor property and development scene.
Over time, an extremely large amount of state land is alienated to Talam, who basically gets it for free. A strong imagination is not required to speculate in whose pockets any resulting profit eventually ends up.Talam’s modus operandi seems to be to pledge this land to the bank in exchange for huge loans, which they then use to finance their development and profit making projects. In essence, since they got the land free, they have successfully achieved money for nothing (it is uncertain as to whether “chicks for free” were involved).
The ‘wise’ businessmen of that era believed in the dictum of never using your own money when you can use someone else’s. This heavy lending continued to characterise Talam’s business approach, and their loans consistently kept getting bigger and bigger.
Tumbling down
Of course, no student of recent economic trends is unfamiliar with the concept of a bursting bubble.
The financial collapse of the late nineties brings Talam’s debt-ridden house of cards crashing down. An overgearing of loans and inability to service them halts various half-completed projects, rendering them idle, half-built ruins.
I
ncredibly however, this does not prevent Talam and their political patrons from altering their basic modus operandi.In 2001, under BN menteri besar Khir Toyo (right), three parcels of land are alienated by Selangor to Talam via their subsidiary Maxisegar Sdn Bhd, who undertakes to construct Unisel’s campus at an estimated cost of RM750 million.
It will probably come as no surprise that Talam failed to complete this project. By September 2006, the company had been classified as an affected company under Practice Note 17 (PN 17), indicating dire financial straits.
New sheriff in town
In 2008, when Khalid Ibrahim assumes the menteri besar’s post, he inherits a situation in which Talam owes the state and its subsidiaries (among other creditors), a great deal of money.
Urban legend has it that when Talam was called in to explain why they have never endeavoured to pay their debts, the sheepish reply given was, “No one ever asked us to.”
Thankfully for the citizens of Selangor, there was a new sheriff in town.Corporate finance is not only an area of expertise for Khalid (left) - it is a passion. With great gusto, he set out to solve this problem, and recover that which was owed by Talam to the people of Selangor.
The problem was undoubtedly challenging, but after some work and careful strategising, a plan was set into motion.
The end goal was simple: to leverage the assets still held by Talam to repay the debt Talam owed to the Selangor and its state subsidiaries.
The technical nitty-gritty
Making this happen was a technically complicated process that required considerable financial acumen.
The summary is this: firstly, the debts that were owed by Talam to Selangor state subsidiaries were properly booked and accounted for - something that, very suspiciously, had not been done before. Once these debts were acknowledged by all parties, the debts were consolidated and transferred to one state subsidiary - Menteri Besar Incorporated (MBI), which was then responsible for collecting the debts from Talam in the form of land and cash.
The rest of this section explains how this was done. It is a boring and complex explanation, but I list it here for the record and for those interested.
Talam owed RM392 million in debt to three Selangor state subsidiaries: KHSB, PIYSB, and PNSB. After acknowledging and booking these debts, the next step was to have another state subsidiary, Selangor Industrial Corporation (SIC), purchase these debts from the other three companies.
A loan from CIMB Bank of RM 392 million was given to SIC to complete this purchase. In November 2009, the state exco and legislative assembly both approve a grant of RM392 million to MBI, who then use the funds to purchase the original consolidated debt from SIC. SIC then uses those funds to pay off their CIMB loan.
The end result is as simple as the transaction itself is complex - without any major or excessive transactional expenses, Talam now owes the same amount of money to just one state subsidiary, instead of the original three.
Restructuring and successful collection
It is important to note that at no point are funds transferred from taxpayer monies to Talam. Funds have instead only been transferred from one pocket of the state to another.
This differs wildly from federal bailouts of corporations like Indah Water Konsortium, MAS, or the Putra/Star LRT, where taxpayer money was injected directly into companies that had probably lost untold amounts via mismanagement, corruption and plundering.The transfers in the Talam debt restructuring allowed for a structure in which there is a clear acknowledgement and accounting for the RM392 million owed by Talam, and a single company for them to pay it to.
The story does not end there.
Another extremely important milestone in this tale is that MBI has in fact already succeeded in recovering all RM392 million in debt owed by Talam.
For those who would like to keep score, this recovery came in two forms.
RM340.88 million was recovered via acquisition of land and assets: 1,322 acres of land in Bukit Beruntung worth RM150.28 million, 2,264 acres of land in Bestari Jaya worth RM105.3 million, 400 acres of land in Ulu Yam and 60% equity in Ulu Yam Golf & Country Resort worth RM22.2 million, 134 acres of land in Danau Putra worth RM52.1 million and five office units in Menara Pandan worth RM11.1 million.
The remaining RM51.12 million was collected in cash: RM12 million from sales of land in Puncak Jalil, RM5 million in cash assignments from EON, RM7.68 million in payments by Unisel for earthworks, RM9.04 million from the sale of 25.94 acres of land in Bukit Beruntung, and RM17.4 million from sales of 218 acres of land in Bestari Jaya.
Go ahead, count it - it's all there.
Facts trump hype - again
How can we summarise this? For more than a decade under BN, one corporation owed the state hundreds of millions of ringgits.
Within a year or two of taking over, Khalid managed to collect on these debts, instantly increasing the amount of money available to spend on welfare programmes throughout Selangor.
Scandal?
Yes, it’s a scandal that Talam was allowed to get the free lunch it did under BN, and it’s a scandal it took this long for to create the change in government that succeeded in cleaning up the mess.
I
t would be insulting to suggest that this article is titled specifically in the hopes that Chua Tee Yong (left) would take the time to carefully peruse the facts within. Nevertheless, perhaps he may find the exercise beneficial in his longer term efforts to maintain what little credibility he has left. Said credibility is shrinking at about the same rate at which he is reducing the amount of money claimed to be ‘misused’ by Selangor - from RM1 billion, to RM260 million, to RM42 million. Before long, he may have to measure in sen instead.
Perhaps Chua fancies himself a Rafizi Ramli. What he fails to understand however, is that Rafizi’s exposes are not just all about ‘glamorous’ press conferences and big numbers. Behind every expose is a ton of hard work and solid research.
Behind Chua appears only to be blind ambition that extends far beyond ability, and a shameful mainstream media that think that hype can overturn facts.
