Business

Wednesday October 21, 2009

Don't worry, Prasarana Negara bondholders have Govt guarantee

By YVONNE TAN and SHARIDAN M. ALI


PETALING JAYA: Syarikat Prasarana Negara Bhd’s financial woes are not worrying its bondholders as the bonds are fully guaranteed by the Government. This, in turn, means the bond market would not suffer any negative implications stemming from concerns that Prasarana, on its own, is not likely meet its RM7.1bil remaining bond commitments.

To recap, the National Audit Report (NAR) released on Monday highlighted major problems in the running of Prasarana, a government-owned transportation company.

The report advised the Government to take drastic action to ensure that it (the Government) did not need to bail out Prasarana. NAR also highlighted that the Government had already stepped in to pay out more than RM2bil to Prasarana’s bondholders.

“It’s more of a note of advice to Prasarana. There will be no impact on the bond market and bondholders as it’s a fully government guaranteed bond,” Bond Pricing Agency chief executive officer Meor Amri Meor Ayob said.

This means that while the bondholders are safe, the Government is likely to step in again to bail out Prasarana. Among the key problems the NAR highlighted was Prasarana’s equity investment of RM26.52mil in KL Infrastructure Group Bhd. The NAR said this was not a wise decision as the latter was in financial trouble due to its incomplete monorail project.

The NAR pointed out that Prasarana’s equity investment in KL Infrastructure had depreciated by 74.5% to RM6.76mil in 2007.

Secondly, the NAR said Prasarana’s board of directors had approved the purchase of a piece of land in Balakong in July 2008, at a price that was higher than the market value.

The 6.86ha cost RM33.25mil, or RM45 per sq ft, which was 10% to 50% higher than valuations provided by the Department of Valuation and Property Services and two other private valuers.

The NAR also said there were weaknesses in the way Prasarana bought buses. The report said that Prasarana bought additional buses from companies that were not approved by the Finance Ministry. Furthermore, the buses were said to be lacking in quality and hence put its users at risk.

Prasarana incurred losses from 2005 to 2007 and the accumulated losses as at Dec 31, 2007 were RM839.81 mil.

The auditor general also said Prasarana’s methods of procurements, write-offs and record keeping of assets were not satisfactory and that the company had failed to establish key performance indicators.

On the flip side, SJ Securities Sdn Bhd deputy managing director Peter Lim pointed out that Prasarana provided public services whose fares were controlled by the Government. Hence this could have impacted its profitability.

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