Malaysia's state palm oil plantation agency said on Thursday it will sell assets, including property in London, restructure some loans and try to boost cash flow in a bid to trim debts of nearly $2 billion.
Megat Zaharuddin Megat Mohd Nor (above), who took over as chairperson of the Federal Land Development Authority (Felda) in July, said he aimed to reduce debt by nearly 20 percent from RM8.03 billion at mid-2018 to RM6.5 billion by year-end.
Felda was set up to settle palm oil farmers, who work for the agency, and also has a one-third stake in Felda Global Ventures Bhd, the world's largest crude palm oil producer.
In recent years it has also diversified into property, including hotels, both locally and overseas, but has been plagued by issues of poor management and allegations of corruption.
Megat Zaharuddin said the property assets to be sold had cost RM2.1-2.2 billion, but declined to put an estimate on their current value.
Felda flagged the property sales last year when it trimmed its stake in Malayan Banking Berhad (Maybank), Malaysia's biggest lender by assets, to raise about RM280 million.
"One thing to tackle is Felda's cash flow. Due to the lack of cash flow, we could not pay what we should have to the settlers," said Megat Zaharuddin, adding that a loan restructuring would improve short-term cash flow and offer "a bit of a lifeline."
A former Maybank chairperson, he said Felda was studying how best to resolve its problems, without elaborating.
"I've been in many turnaround situations before, big and small. This is big. The turnaround of Felda will need a minimum of two years," he said.
Megat Zaharuddin took over as chairperson when his predecessor Shahrir Samad resigned in the wake of Malaysia's shock election results which saw the defeat of a 60-year ruling coalition.
Felda settlers form the majority of rural voters in at least 54 of the 222 seats in the national parliament and have been pivotal in the former ruling coalition maintaining its grip on power since Malaysia's independence in 1957.
Additionally, Felda also needed to improve its palm oil productivity to increase earnings, said Megat Zaharuddin.
"Our fresh fruit bunch productivity at Felda is above the national average of 20 tonnes per hectare, but we are not yet best in class," he said, citing 24 tonnes per hectare as the target.