While Pengurusan Danaharta Nasional Bhd officially put up the shutters at the end of 2005, its work was far from over. Ministry of Finance Inc-owned Prokhas Sdn Bhd picked up where Danaharta left off, taking charge of the remaining RM2.88 billion worth of residual assets. This is all that is left of the assets that backed some RM50 billion worth of non-performing loans, which almost dealt the country’s banking system a death blow in 1997.
Four years on, Prokhas has managed to collect, on behalf of Danaharta, some RM2.92 billion cash, with a balance of RM650 million still outstanding. The company is targeting to recover a final sum of RM3.57 billion by end-2011, which will be returned to the government.
Be that as it may, it would be a mistake to consider Prokhas an evolution of Danaharta, something its managing director Fazlur Rahman Ebrahim is quick to point out. Prokhas’ role is to recoup credit, manage the already restructured assets and convert them to cash, he says.
“While the public perception is that Danaharta no longer exists, the truth is that it is still a registered entity, but no longer receives any new accounts. Likewise, the Danaharta Act of 1998 is still in existence,” Fazlur tells The Edge.
It is Prokhas’ job to handle the stragglers — 805 legal action accounts that it deals with through conventional means. Fazlur says all the large accounts of more than RM100 million have been dealt with, save for one. In terms of properties, Prokhas has helped sell 67 of them worth RM115.35 million between 2005 and now.
However, Fazlur says, the company has to be creative in selling Danaharta’s remaining properties — haphazard chunks of real estate that he labels as “difficult”.
“Danaharta has in its portfolio 188 properties collectively worth some RM600 million. However, these are either in the middle of nowhere, abandoned, partly sold, in bad condition or apartments where our ownership is negligible compared to the total number of units available and are managed under the Strata Title Act 1965,” he says.
Examples are two abandoned shopping complexes in Penang worth RM56.6 million and resort bungalows with a clubhouse in Perak valued at RM15.26 million.
Going forward, Prokhas is looking to organise a structured fire sale next year for a portion of the properties. The first batch will involve RM130 million worth of assets, says Fazlur.
“What will happen is that the properties will be sold via tender and the reserve price will be adjusted down by 10% every quarter. We may even consider converting some of the land, so it can be used for agricultural purposes. At the moment, we are valuing the properties using residential, commercial or industrial prices.”
However, Fazlur stresses, the structured fire sale will be held only for a year. If the response and feedback is disappointing, Prokhas will go back to the drawing board.
“We will have to sit down and think of a different approach,” says Fazlur.
Prokhas is also considering other proactive methods when it comes to dealing with the properties. One is to convert charged properties so that Danaharta has full ownership and thus total control. At the present time, only 78 of the 188 properties are proprietary.
“There are cases where we will rehabilitate the properties to make them saleable or where they can generate income to maximise recovery. We are looking at refurbishing a high-rise building in the KL city centre, which should be completed by the end of next year,” says Fazlur.
However, he declines to mention exactly how much will be spent on refurbishing the building.
“But be assured that we will refurbish a building only if we see prospects of sale or lease. In other cases, we will appoint receivers and managers to oversee the operations and once the earnings have stabilised, we may consider selling it off,” he says.
One of the company’s success stories is MS Garden Hotel in Kuantan, which Fazlur says is profitable.
At the end of the day, the goal is to return money to the government. According to Fazlur, Danaharta now holds around RM1.5 billion worth of cash. He hopes to make this RM2 billion by the end of 2011 and return the money to the government.
It reportedly cost the government RM12.5 billion to prevent the collapse of the banking system during the Asian financial crisis. Fazlur says he is hoping to bring that figure down somewhat.
“Danaharta’s final lifetime loan recovery rate came in at 58%. We are hoping to beat that with 59% by the end of 2011,” he adds.
A look at the Danaharta group’s balance sheet reveals a decline in its accumulated losses and a rise in its shareholders’ funds. As at Dec 31, 2005, shareholders’ funds stood at RM1.82 billion but by Aug 31, 2009, this had increased to RM2 billion.
More telling is the group’s current liabilities, which had dropped from RM250.45 million as at the end of 2005 to RM78.05 million by Aug 31, 2009.
While the names of Danaharta and Prokhas will always be closely intertwined, Fazlur points out that the former had a shelf life while the latter does not. Without disclosing the company’s exact plans, he says there is life for Prokhas beyond Danaharta.
“Credit recovery is a specialised business. We may even look overseas to offer our services to similar organisations like Danaharta,” he adds.
In addition to Danaharta, the government also set up Danamodal Nasional Bhd and the Corporate Debt Restructuring Committee to aid the banking system during those turbulent times. Prokhas helps to manage the residual assets of all three organisations.This article appeared in The Edge Malaysia, Issue 773, Sep 21-27, 2009.