The Boustead Group’s restructuring exercise aims to address outstanding issues and transform the Armed Forces Fund Board (LTAT) into a sustainable retirement fund that generates substantial dividends, according to Datuk Seri Mohamad Hasan.
The Defence Minister stated that approximately 50% of LTAT’s investment funds are currently “trapped” within the Boustead Group, with its performance heavily reliant on the financial condition of Boustead.
Mohamad also highlighted Boustead’s liabilities, which amount to RM6.8 billion.
Among the upcoming debts to be serviced are a RM159 million credit repayment, RM607 million of perpetual sukuk redemption in December, and RM1.65 billion of Islamic Medium Term Notes repayment in September 2024.
He further noted that Boustead Holdings Bhd, a subsidiary of the Boustead Group, incurred its first loss since being listed on Bursa Malaysia in 2018.
“Since then, Boustead has been unable to pay any dividends to LTAT. Only in the fourth quarter of 2022 did Boustead manage to pay a dividend of 1.5 sen per share,” he stated during a session at the Dewan Rakyat on October 9.
Mohamad explained that the Boustead Group is currently facing cash flow issues due to its responsibilities in servicing legacy debts.
Consequently, Mohamad emphasized the importance of the Strategic Plan 2023-2025 (Manpan25), launched in July, as it offers a potential solution.
“In the event that the restructuring cannot be implemented, Boustead Group will be unable to fulfill its financial obligations, leading to a cross-default on all borrowings under the group, amounting to RM6.8 billion,” he warned.
If this were to occur, Boustead would be at risk of bankruptcy, causing the value of LTAT’s fund to depreciate by almost RM5 billion.
Mohamad further explained that restructuring the Boustead Group would allow LTAT to reduce its dependence on the group for income.
Reducing LTAT’s holdings in Boustead Group would have a positive long-term impact by diversifying assets by 50% and limiting asset allocation in Boustead to 15%. It would also increase asset liquidity from 20% to 60% and enable the recouping of LTAT’s investment in Boustead for reinvestment in competitive assets that guarantee sustainable returns.
“As a retirement fund, LTAT should prioritize asset diversification and avoid holding significant investments that deviate from the actual model of a retirement fund,” Mohamad asserted.
Concluding his ministerial explanation, Mohamad stated that a restructuring phase is necessary to rectify Boustead’s balance sheet.
“We have a very solid balance sheet but face cash flow issues. This is not a bailout. Bailouts are reserved for bankrupt companies, which we are not. We possess substantial assets,” he clarified.
Mohamad’s explanation focused on the financial position of the Boustead Group and its impact on LTAT.
He highlighted LTAT’s increased dividend rate, rising from 2% in 2018 to 5% in 2022, indicating a recovery resulting from transformative efforts over the past five years.
LTAT’s net profit reached RM432.5 million in 2022 compared to RM221.0 million in 2018, with cumulative earnings of RM498.7 million by the end of 2022, compared to RM38.7 million at the end of 2018.
Credit: The Star : News Feed
