Debt distress lurks among Malaysia private firms

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SINGAPORE (April 18): Debt distress in the Southeast Asian nation may be understated as recent cases have involved non-listed companies in oil and gas and real-estate sectors, according to Claudia Cheah Pek Yee, a partner at Kuala Lumpur-based Skrine & Co.

* Recent debt restructuring in the region also involved Malaysian-owned companies including Nam Cheong and Perisai Petroleum

* “The distress among companies in the oil and gas industry remains acute from what we can see in our works in the past year,” says Cheah, who specializes in dispute resolution and restructuring and heads the firm’s China desk. “It would not be too pessimistic to say that it will take years for them to recover”

* “Some are affected by liabilities in the RM500 million to RM1 billion bracket. These cases, though not widespread, are lurking under the surface because they involve a lot of closely-held entities, and some are family-owned businesses”

* “Their search for white knights go as far as China but they have been pretty hard to come by”

* Malaysia incorporated a new corporate rescue mechanism into its legal framework in March 2018, which includes provisions for corporate voluntary arrangement akin to the UK system, and judicial management like in Singapore; both offer alternatives to liquidation

* Since then, there have been 19 applications for judicial management, with eight approved and two denied, Cheah says, citing data from Companies Commission of Malaysia