KUALA LUMPUR: The RM8.5 billion for Silterra Malaysia Sdn Bhd’s proposed expansion plan, a hot point of contention by members of parliament, never made it to its major shareholder Khazanah Nasional Bhd’s board level, sources said.
“The RM8.5 billion expansion plan was never considered at Khazanah’s board level,” a source close to the matter said. The Edge Financial Daily’s queries to Khazanah officials remained unanswered at press time. Silterra chief executive officer Eg Kah Yee could not be reached for comment.
On Monday, taking cue from member of parliament for Labis Chua Tee Yong, DAP’s national public secretary Tony Pua said the party was “fearful”of loss-making when Silterra was seeking an additional RM8.5 billion to fund its expansion.
When contacted, Pua said what he was referring to was the financing plan the company had said it was working on last year.
The Edge weekly reported last November, via an interview with Silterra’s Eg, that the RM8.5 billion was for a capacity expansion plan spanning three phases, which would help Silterra be more competitive globally.
The plan was to fund the expansion via multiple channels, including loan financing, internally generated funds and raising funds from existing investors and external parties.
Pua said he was unaware if the expansion plan was still being pursued. It is learnt that Khazanah has directed Silterra to put the expansion plans on hold. Pua said the DAP was still awaiting a response from the Ministry of Finance and Khazanah concerning the issues raised over Silterra.
He noted also that Silterra was in a very competitive industry. Consumer electronics is the bread and butter for Silterra, a private company founded in 1995 and 98% owned by Khazanah.
He noted also that Silterra was in a very competitive industry. Consumer electronics is the bread and butter for Silterra, a private company founded in 1995 and 98% owned by Khazanah.
About 80% of the chips it designs are used in handheld devices, some 10% for wireless routes and cable TV/broadband set-up boxes and 10% for large-volume chip production.
The concern by Pua and Chua over Silterra’s future has been underscored by the public, which has taken to expressing their concerns on various blogs, wondering aloud if Silterra would go the way of Chartered Semiconductor Manufacturing Ltd.
Despite being the world’s third-largest made-to-order chipmaker, the Singapore government-linked company posted its biggest loss in five quarters late last month on slumping demand for chips used in consumer electronic devices.
Other issues Pua highlighted last Monday included the RM1 billion losses posted by Silterra from the 2005 through 2007 financial years and reduced shareholder capital in the company.
He said that the Ministry of Finance (MoF) and Khazanah should explain to parliament on the losses, the continued viability of the company and the measures put in place to rescue it.
As the issues have been raised on parliamentary grounds, the normal procedure would be for the MoF to respond in parliament on the matter, given that it is the parent of Khazanah.
As the issues have been raised on parliamentary grounds, the normal procedure would be for the MoF to respond in parliament on the matter, given that it is the parent of Khazanah.
“The company should be given a chance to continue its operations, we hope that if they intend to go ahead with funding the expansion, it will be from private equity investors that are convinced of the business model.
“More than bringing in key people, they (Khazanah) need to come up with a strong, viable plan to sell to investors,” Pua told The Edge Financial Daily.
Sources familiar with Silterra said the RM1 billion losses were due to depreciation and amortisation of assets, which had previously not been accounted for.
It is learnt that this was carried out under an impairment exercise carried out by management to ensure that the company’s assets reflected that of market value, part of the company’s move to attract strategic investors.
Pua had pointed out that Silterra’s shareholder capital had been reduced from RM5.2 billion to RM798 million in 2006, and likely lower in 2007.
While data for 2007 was unavailable at press time, the sources said the shareholder capital was part of the company’s capital reduction exercise, where the losses were ultimately written off.
Pua had also said that the government had injected RM5.2 billion into Silterra since 1994. The sources, however, clarified that the amount was in fact RM5.14 billion since 1995.
Pua had also said that the government had injected RM5.2 billion into Silterra since 1994. The sources, however, clarified that the amount was in fact RM5.14 billion since 1995.
The sources added that Khazanah had incurred heavy bank borrowings in the past to build Silterra’s wafer fab in the late 1990s, where interest payments for borrowings accumulated over the years and weighed down Silterra’s balance sheet and thus contributing to heavy losses.
Going forward, Silterra will need to return to financial health bearing in mind that it has bond obligations. Its special purpose vehicle Silterra Capital Bhd issued RM1.8 billion fixed-rate seven-year government guaranteed Islamic Trust certificate bonds last year that are maturing in 2014. -- theedgedaily
1 comment:
Thanks betty.
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