economic report

The Corporate Debt Restructuring Committee (CDRC) is expected to receive less applications as only cases from a borrower with a minimum debt of RM100 million will be accepted, said the Finance Ministry.

The 2001/2002 Economic report issued by the ministry said eligible cases applying for restructuring exercise must also be exposed to at least five creditor banks compared to a minimum debt of RM50 million and two creditor banks previously.

"The final initiative would be in the area of disclosure and reporting to keep the market abreast of its restructuring efforts," said the report distributed to members of parliament.

"More importantly, the revised framework also emphasises the need for borrowers to undertake operational restructuring alongside debt restructuring," the report added.

CDRC received 62 eligible cases with debts valued at RM56,383 million up to August this year.

In the report, CDRC was reported to have successfully completed restructuring 35 cases with debts worth RM27,379 million, including five cases which were resolved by Danaharta, the ministry's investment arm.

Twenty-seven cases were reported to record outstanding debts of RM29,004 million as of August this year.

CDRC is currently restructuring seven previously completed cases, which are currently being revised due to changes in market conditions and six cases being structured by Danaharta with debts totaling RM1,573 million.

The report said the debt restructuring process by CDRC is expected to be accelerated with the new set-up and the recent rules which were put in place.

"Among others, CDRC has widened its steering committee's membership to include representatives from Danaharta and the Federation of Public listed companies."

"There are also significant changes in the framework and approach used to speed up the restructuring process such as establishing a time line for restructuring,"said the report.

Merger programme

Meanwhile, the report stated that the merger programme for the banking sector has been succesfully completed with 52 out of 54 banking institutions consolidated into 10 banking groups.

"As at end of June this year, Danaharta's non-performing loan (NPLs) portfolio amounted to RM48,027 million, accounting for approximately 39.7% of total NPLs of the banking system," the report said.

"Total purchase price for acquiring the NPL was RM9,015 million, comprising RM800 million in cash and government guaranteed bonds valued at RM8,215 million," the report added.

However, the report said the restructuring cost of the banking sector has been lower at RM18,100 million than the anticipated RM31,000 million.

According to the report, Danaharta is currently focusing on managing its NPL portfolio, employing various resolution methods such as loan restructuring, rescheduling and schemes of arrangement for viable loans as well as foreclosure and appointment of special administrators for non-viable loans.

Up to the end of June this year, Danaharta has initiated recovery action on 81 percent of NPLs under its portfolio.

The expected recovery from NPLs is RM23,210 million, representing a recovery rate of 57 percent.

Danamodal has injected RM7,590 million capital into banking institutions since its establishment in Aug 1998.

To date, seven banking institutions have made full repayment while two made partial repayment, amounting to RM3,850 million.

The outstanding recapitalisation in the remaining three banking institution stood at RM3,740 million as at July this year compared to RM4,440 million last year.

It is expected to be further reduced with the recent sale and purchase agreement concluded for one of the three banking institutions, the report said.