Deposit returned to IWH CREC

KUALA LUMPUR (May 12): IWH CREC Sdn Bhd has received the refund of RM741 million that it had paid as deposit to purchase a 60% equity stake in Bandar Malaysia Sdn Bhd for RM7.41 billion.

The return of the deposit signifies that the stake sale has been officially terminated and that TRX City Sdn Bhd, a former unit of the controversial 1Malaysia Development Bhd (1MDB), can now look for new investors to participate in the massive development at the former air-force base in Sungai Besi here.

By the same token, the proposed merger between Iskandar Waterfront City Bhd (IWC) and Iskandar Waterfront Holdings Sdn Bhd (IWH) will not be involved in the sizable prime land, which is less than 8km away from Petronas Twin Towers and KL Sentral. 

When contacted by The Edge Financial Daily, IWH CREC confirmed the receipt of the deposit, but declined to comment further on the sudden termination of the stake sale. 

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

TRX City announced last Wednesday that the sale of its 60% equity interest in Bandar Malaysia for RM7.41 billion cash was terminated as IWH CREC had failed to meet payment obligations.

Consequently, TRX City said it will immediately be inviting expressions of interest for the role of master developer of Bandar Malaysia, with full ownership being preserved by the ministry of finance.

IWH CREC initially disputed the claims by TRX City on its failure to make payments.

The termination of the deal resulted in heavy selldown in IWC shares, which has seen market capitalisation of RM1.17 billion being wiped out in the past three trading days when it resumed trading on Monday.

IWC was once sought after by investors as it was seen as a good proxy to ride on the growth potential of Bandar Malaysia following the merger with its sister company IWH through a proposed share swap exercise. Kang Hoo controls both IWC and IWH.

The share sale agreement between IWH CREC and 1MDB was signed in December 2015. CREC would have held an effective 16% equity stake in Bandar Malaysia. This is the largest investment made by the China’s state-owned enterprise in Malaysia since it was set up in 2001.

CREC’s participation in Bandar Malaysia then sparked speculation that it was to pave the way for its bid for the Singapore-Kuala Lumpur high-speed rail. The stake sale deal was sealed at the critical moment when 1MDB was in dire need of cash to meet its debt obligations.

In an interview in December last year, CREC’s general manager Cai Zemin told The Edge Malaysia weekly that the state-owned enterprise would start the ball rolling by spending US$2 billion to set up its regional centre in Bandar Malaysia.

Now, the development of the 583.37 acres (236ha) of prime land in Bandar Malaysia is back to the drawing board. There is a slew of local and foreign companies said to be keen on the Bandar Malaysia project, including property tycoon Tan Sri Desmond Lim and China-based real estate giant Dalian Wanda Group as well as government-liked companies.

Nonetheless, Malton, Desmond’s flagship company, has issued a denial to Bursa Malaysia noting that neither its directors nor shareholders is in any discussion to bid for the Bandar Malaysia project.

Prime Minister Datuk Seri Najib Razak will make an official visit to China to participate in a two-day One Belt One Road Conference in Beijing that starts on Sunday (May 14). It will be interesting to observe what would pan out when he meets China’s President Xi Jinping and Premier Li Keqiang.

This article first appeared in The Edge Financial Daily, on May 12, 2017.

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