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Friday March 30, 2012

Maybank’s exposure to Vinashin loan default is small

By FINTAN NG and CECILIA KOK
starbiz@thestar.com.my


PETALING JAYA: Malaysia's largest banking group, Malayan Banking Bhd (Maybank), has clarified that its exposure to the US$600mil (RM1.84bil) unsecured funding facility on which Vietnam Shipbuilding Industry Group (Vinashin) has recently defaulted is minimal and insignificant.

“Our exposure (to that facility) is actually very small relative to our group's assets it's not significant,” Maybank president and CEO Datuk Seri Wahid Omar said in a press briefing in conjunction with the company's AGM yesterday.

Maybank's group total assets as at Dec 31, 2011, stood at RM451.3bil.

Concerns over how much exposure banks have in Vinashin's defaulted debt facility resurfaced recently after nine former executives of the state-owned shipbuilder were charged with mismanagement of assets on Tuesday.

Wahid (left) and Maybank chairman Tan Sri Megat Zaharuddin Megat Mohd Nor at the press briefing.

Vinashin defaulted on the facility for the third time late last year when it missed another US$60mil payment deadline, bringing the total of missed payments to US$180mil to date. The first missed payment of US$60mil was in December 2010 while the second was in the middle of last year.

Credit Suisse Group AG was the lead arranger of the loan facility to Vinashin, while Maybank has been linked to the deal as an arranger as well as participant.

Maybank was also part of a group of lenders that formed a steering committee in 2010 on Vinashin's debt problems. Other members of the committee included Credit Suisse, Elliott Advisors LP, Depfa Bank plc and Standard Chartered plc. Elliott resigned from the committee in early October while Standard Chartered left last April.

Vinashin, already in debt to the tune of more than US$4bil, had been severely hit by the global financial crisis and the recession that followed, but its troubles were compounded by investments in non-core assets including motorcycle manufacturing.

When Vinashin first defaulted, analysts had considered the subsequent government refusal to bail out the shipbuilder as a make-or-break moment for Vietnam, which was considered in the 2000s as the investment destination to go to in Asean.

Debtwire reported that various proposals had been placed on the table, with a government proposal last October to guarantee the loan in a restructured form, a 180-degree turnaround from when the debt was issued in 2007, when it had merely issued a “comfort letter” but stopped short of an explicit guarantee.

Vinashin's two options included a recovery of 35-40 cents on the US dollar or for the existing USS600mil loan facility due in 2015 to be rolled into a new 13-year government-guaranteed bullet facility with no principal haircut but also no interest.

The creditors proposed to roll over the debt into a new US$600mil 15-year bullet facility with a 150bp margin over Libor which then rises by 50bp from the 11th to the 15th year with capitalised interest.

Maybank, which saw its net profit for the six months ended Dec 31, 2011 surged 20% to a record RM2.58bil on revenue increase of 26.4% to RM12.88bil, said it had gained shareholders' approval at yesterday's AGM for the proposed final dividend of 36 sen per share less 25% tax.

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