CIMB is adviser for Edra sale

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KUALA LUMPUR: Financial services provider CIMB Group Holdings Bhd announced that it had been appointed adviser to the Ministry of Finance (MoF) to find strategic investors for the potential sale of 1Malaysia Development Bhd’s (1MDB) energy arm, Edra Global Energy Bhd.

“CIMB’s role will include identifying potential buyers and running a competitive process for Edra to derive an optimal outcome for MoF,” said the bank in a statement yesterday.

However, CIMB (fundamental: 1.05; valuation: 1.5) said its appointment “does not extend to any other areas” relating to the controversial state wealth fund.

This confirms The Edge Financial Daily’s report on March 19, quoting sources, that the MoF had asked CIMB Investment Bank Bhd, CIMB Group’s corporate and investment banking outfit, to look at a strategic sale of the power assets of 1MDB as an alternative to the planned initial public offering (IPO), which had run into headwinds because of various problems.

It had said that the MoF, as the sole shareholder of 1MDB, was worried that the IPO, initially planned for late last year and now targeted for mid-2015, might not materialise and wanted to consider another option.

“They are in need of cash to help pay off their debts and they are worried that the IPO may not happen, so they need to consider an alternative,” said a source quoted in the daily.

CIMB’s statement yesterday also clarified its role in relation to 1MDB after The Malaysian Insider reported on Wednesday, quoting Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah in Parliament, that the government had asked CIMB to be a “third party” to perform an evaluation of 1MDB for the IPO of its power assets.

The statement came when he announced that a special task force will be set up to investigate 1MDB’s operations and its RM42 billion debt, which is separate from the one by the Attorney-General (AG) announced last week that comprises the Inspector-General of Police Tan Sri Khalid Abu Bakar, the Malaysian Anti-Corruption Commission, the AG’s chambers and the police.

Besides himself, Ahmad Husni said the members of this new task force will include Minister in the Prime Minister’s Department Datuk Seri Abdul Wahid Omar, Chief Secretary to the Government Tan Sri Dr Ali Hamsa and Treasury secretary-general Tan Sri Dr Mohd Irwan Serigar Abdullah.

“The government has set up a task force. We are looking at it entirely, including 1MDB’s debts,” Ahmad Husni said.

He added that the fund’s cash flow problems will be resolved once the IPO of its power assets take off.

However, critics of 1MDB have said that the IPO will not be enough to resolve its woes, as the exercise would barely raise RM18 billion, while its debt stood at RM42 billion.

“Even in the event that 1MDB is able to successfully list its energy subsidiary and sell its land bank at premium prices, the financially-stricken company can only raise barely RM18 billion to repay its RM42 billion debt, recorded as at March 31, 2014,” said DAP’s Tony Pua in a statement on March 13.

CIMB closed one sen or 0.16% higher at RM6.19, bringing its market capitalisation to RM52.23 billion.

 

This article first appeared in The Edge Financial Daily, on March 27, 2015.