TH says nearly RM10b in asset sales aided recovery, RM2.6b losses later addressed

The Lembaga Tabung Haji (TH) Recovery and Restructuring Plan has successfully addressed RM12.6 billion in investment losses, with RM10 billion resolved under the 2018 recovery plan and the remaining RM2.6 billion recognised progressively through the end of 2025.

In a statement, TH said the 2018 restructuring was undertaken to address a financial deficit that necessitated an immediate government bailout to prevent the institution from becoming insolvent.

The gap between assets and liabilities, first identified at the end of 2017, widened to more than RM10 billion by the end of 2018.

TH said that without intervention before the end of 2018, it would have been unable to meet the requirements of the Tabung Haji Act to declare any profit distribution.

"Without the government's bailout at the time, it could also have triggered a financial market crisis and threatened the country's financial stability, as TH would have been forced to sell assets at distressed prices to meet a surge in deposit withdrawals (a deposit run) after it was unable to declare a profit distribution to depositors," TH said.

Four options considered

According to TH, the government and the pilgrimage fund considered four options to implement the recovery and restructuring plan within the limited timeframe before the end of 2018.

It said the chosen approach involved selling underperforming and distressed assets to the government at a premium valuation to eliminate the asset-liability gap and restore TH's solvency.

TH said the government's wholly owned special-purpose vehicle, Urusharta Jamaah Sdn Bhd (UJSB), acquired assets with a book value of RM9.7 billion for RM19.9 billion, thereby eliminating the deficit and allowing TH to declare a profit distribution for 2018.

The transaction was financed through two series of sukuk issued by UJSB and backed by government letters of support, carrying annual profit rates of 4.05 percent and 4.10 percent.

TH said UJSB had subsequently made several offers to sell assets back to the institution, but none met its investment criteria.

This year, after reviewing the assets offered by UJSB, TH repurchased a parcel of land in the Tun Razak Exchange (TRX) at the prevailing market price of RM270 million, compared with its original sale price of RM400 million.

It also repurchased UJ Estates (Holdings) Sdn Bhd's oil palm plantation for RM695 million, below the original sale price of RM800 million.

"These transactions demonstrate that TH will only reacquire assets that enhance its investment portfolio and safeguard the interests of its depositors," it said.

Necessary financial bailout

TH further described the recovery and restructuring plan implemented in 2018 as a necessary financial bailout to prevent the institution from becoming insolvent, saying that TH would have otherwise faced the risk of a massive deposit withdrawal that could trigger a financial market crisis and undermine the country's economic stability.

It said the government's bailout enabled TH to execute its recovery plan in 2018, thereby safeguarding depositors' savings and ensuring the institution's financial sustainability.

“The profit distribution, in light of the asset-liability gap exceeding RM10 billion as at end-2018, had the potential to trigger a run on deposits and force TH to sell its assets at distressed prices to meet large and uncontrollable cash withdrawal requests from depositors,” TH added.

TH said it has since returned to a stronger and more sustainable footing through the implementation of strategic plans, reforms, and improved governance, all without government interference.

TH noted its profit distribution had improved steadily, rising to 3.25 percent for 2024 and 3.50 percent for 2025, compared with 1.25 percent in 2018.

The distributions were declared after recognising RM2.6 billion in impairments on problematic assets that could not be transferred to UJSB at the end of 2018 for various reasons, it stated.

"TH’s financial position is now stronger, and it has begun rebuilding reserves to ensure a more stable future.”

TH added it remains committed to safeguarding depositors' interests, strengthening public trust, and ensuring the institution continues to operate with integrity and accountability.

- Bernama

COMMENT | Tabung Haji and Malaysia's endless 'I didn't know' defence

SNAPSHOT | S'gor weighs by-election over bankrupt rep claim; RCI gaps not a free pass: Syed Saddiq

'Sakau' or not? Five key takeaways from Tabung Haji RCI

'I don't wield absolute power over Tabung Haji' - Azeez