This article first appeared in The Edge Malaysia Weekly on August 9, 2021 - August 15, 2021
PRASARANA Malaysia Bhd is looking to issue RM1.7 billion worth of Islamic debt papers in mid-August and has roped in six investment banks — Maybank Investment Bank Bhd, CIMB Investment Bank Bhd, RHB Investment Bank Bhd, AmInvestment Bank Bhd, Kenanga Investment Bank Bhd and Bank Islam Malaysia Bhd — to assist in the deal, sources say.
The tenure of the debt paper, it seems, could range from five to 20 years.
Prasarana declined to reply to questions sent by The Edge, thus other details of the sukuk are not available.
A wholly-owned unit of the Ministry of Finance Inc, Prasarana controls, owns and operates the urban rail services in Kuala Lumpur, which include three light rail transit (LRT) networks, the KL monorail and mass rapid transit lines. It also owns and operates the Rapid bus services in Kuala Lumpur, Selangor, Penang, Perak and Pahang and provides management and engineering consultancy services, among others.
It is understandable that the Covid-19 pandemic, which has resulted in a series of lockdowns, has badly impacted Prasarana.
“Prasarana is hard-pressed for cash. The lockdown and the cheap tickets have taken a toll on the company, and there is no money,” says one source.
The government, in an effort to reduce the costs of travelling for those using public transport, introduced a RM30 programme in mid-June last year, which allows unlimited travel via rail or bus.
Another source who is aware of the debt-raising exercise says some of Prasarana’s plans have been put on hold due to a lack of funds.
Nevertheless, the new issue of Islamic debt papers is the second within a year. The public transport operator raised RM1 billion — in eight- and 12-year government guaranteed debt papers with coupon rates of 2.78% and 3.1% — last October.
For its financial year ended Dec 31, 2019 (FY2019), (its latest on CTOS), Prasarana suffered an after-tax loss of RM3.61 billion, while revenue was stated as zero for whatever reason. In FY2018, it posted an after-tax loss of RM5.15 billion from RM746.09 million in revenue. The company has suffered losses in its last five financial years.
As at end-2019, Prasarana had accumulated losses of a whopping RM42.41 billion and amassed total liabilities of RM35.38 billion, while total assets came up to RM1.3 billion. Current liabilities (usually due in 12 months) amounted to RM6.52 billion.
Prasarana’s total liabilities in FY2015 totalled RM19.16 billion, which means its debts have risen by nearly 85%% over the past few years. Similarly, the transport company’s accumulated losses amounted to RM6.21 billion in 2015, which means an increase of more than 6.5 times over the last five years.
Among the questions The Edge had asked Prasarana was whether it was possible to revive the company and what the major challenges were.
There have been significant changes at the helm of Prasarana, which could possibly turn the tide. Last month, the company appointed Tan Sri Jamaludin Ibrahim — of Axiata Group Bhd and Maxis Communications Bhd fame — as its chairman, and Mohd Azharuddin Mat Sah, who was previously with Malaysia Airlines and the Land Public Transport Commission, as CEO.
Jamaludin and Mohd Azharuddin look likely to have their hands full at the public transport operator.
Before Mohd Azharuddin’s appointment, chief operations officer Datin Norlia Noah took over temporarily as CEO. Prasarana’s previous CEO, Muhammad Nizam Alias, left in March amid much controversy, following a feud with Prasarana’s former chairman, Datuk Seri Tajuddin Abdul Rahman, the member of parliament for Pasir Salak.
At end-May this year, Tajuddin was axed as chairman. This came after a press conference on a crash involving two LRT trains, which left 47 passengers seriously hurt and another 166 sustaining minor injuries. Tajuddin came under much flak for his lack of empathy for the victims.
He was also questioned by the police for flouting standard operating procedures at the press conference.
Since then, he has also been called in by the Malaysian Anti-Corruption Commission (MACC). The MACC’s investigations into Prasarana came after allegations of negligence, failure to discharge fiduciary duties and abuse of power were made against former members of the management who served from 2015 to 2018. Many of the grouses stemmed from Prasarana’s involvement in the operations and maintenance of the Al Mashaaer Al Mugaddassah Makkah Metro Southern Line in Saudi Arabia.
In December last year, 17 contractors and consulting firms involved in the LRT3 project jointly signed a letter to Prime Minister Tan Sri Muhyiddin Yassin, the Ministry of Finance and the Ministry of Transport, alleging that Prasarana had not paid them since July, and that they were owed RM700 million as Prasarana had withheld their payments.
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