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Thursday, 4 May 2017

(The Edge) Sale of stake in Bandar M’sia aborted

IWH CREC disputes TRX City’s claims over termination

KUALA LUMPUR: TRX City Sdn Bhd announced yesterday that the sale of its 60% equity interest in the Bandar Malaysia project for RM7.41 billion cash had been terminated as IWH CREC Sdn Bhd had failed to meet payment obligations.

Consequently, TRX City, an indirectly owned unit of the ministry of finance (MoF), will immediately be inviting expressions of interest in the role of master developer of Bandar Malaysia, with full ownership being preserved by the MoF.

The termination of the deal came as a surprise to many. It is learnt that Prime Minister Datuk Seri Najib Razak, who had planned to visit Bandar Malaysia yesterday, cancelled his visit at the eleventh hour.

The news will not augur well for Iskandar Waterfront City Bhd (IWC) whose share price has tripled since February following the proposed merger with sister company Iskandar Waterfront Holdings Sdn Bhd (IWH) that holds a 60% stake in IWH CREC through a share swap exercise. IWC’s share price slid 4.35% or 14 sen to RM3.08 yesterday, with 13.34 million shares changing hands.

IWH’s equity interest in the Bandar Malaysia project is considered as the crown jewel of the merger exercise, in which major shareholder Tan Sri Lim Kang Hoo and the Johor Sultan will also inject land bank into the merged entity.

In a statement, TRX City said despite “repeated extensions being granted”, IWH CREC had failed to meet the payment obligations outlined in the conditions precedent under the share sale agreement (SSA).

“As a result, the share sale agreement between the parties stands null and void with immediate effect,” it said in a statement yesterday.

IWH CREC is a 60:40 joint venture between IWH and China Railway Engineering Corp (M) Sdn Bhd (CREC). Lim holds a 63% stake in IWH, while Kumpulan Prasaran Rakyat Johor Sdn Bhd owns the remaining 37%.

IWH CREC disputes the claims by TRX City over the termination of the stake sale of the Bandar Malaysia project.

“IWH CREC is concerned with the content of the termination notice and the subsequent press release issued by TRX City, which, given the factual matrix, do not fully and accurately reflect the circumstances and conduct of the parties in this matter,” said the consortium in a statement issued in response to TRX City’s announcement yesterday.

“IWH CREC takes this matter very seriously and is at present reviewing the content of the termination notice and press release with its advisors and legal counsel,” the statement added. “A further announcement on this matter will be made in due course.”

On Dec 31, 2015, TRX City signed an SSA with IWH CREC. The signing ceremony was witnessed by Najib and Ambassador of China to Malaysia Dr Huang Huikang.

The seal of the deal to dispose of a 60% stake in Bandar Malaysia was considered as a major milestone for controversial 1Malaysia Development Bhd, which was in dire need for fresh cash to meet its debt obligations. IWH CREC had paid a 10% deposit of RM741 million then.

Bandar Malaysia has RM2.4 billion sukuk maturing between 2021 and 2024, carrying effective profit rates of between 5.85% and 6.05%.

CREC has made known that it would facilitate to attract China-based financial groups and conglomerates to set up regional hubs in Bandar Malaysia, located at the former air force base in Sungai Besi.

On its website, TRX City said it is offering marquee incentives for financial companies, some of which include an industrial building allowance of 10% per year, 150% deduction on rental for 10 years, and 150% deduction on rental of TRX premises for 10 years.

TRX City is also offering a tax fringe that includes a 70% tax exemption on income from the sale or rental of properties in the Tun Razak Exchange, part of the overall Bandar Malaysia development, for a period of five years.

With the new twist to the event, TRX City said given a significant appreciation of the value of the Bandar Malaysia land, the MoF will now be retaining 100% ownership of the site to ensure that the Malaysian people benefit from its development in its entirety.

On the selection process for the master developer of Bandar Malaysia, TRX City said the criteria will include track record, speed of delivery and financial capability for such a large-scale development.

“The steps taken today will ensure that there is no detrimental impact on the long-term development of Bandar Malaysia and that, upon its completion, the site will serve the national interest to an even greater extent than before,” it added.