PwC also proposing measures to reinstate confidence in Tabung Haji

PETALING JAYA: To immediately reinstate confidence in Lembaga Tabung Haji, PricewaterhouseCoopers Malaysia has proposed that the government take over assets worth almost RM20bil from the pilgrims’ fund.

In addition, it proposed that Bank Negara provide a temporary short-term borrowing of RM10bil to enhance the liquidity position of Tabung Haji.

The two measures, outlined in the firm’s report tabled in Parliament yesterday, were part of a plan to carve out the under-performing assets of Tabung Haji and place them in a Special Purpose Vehicle (SPV).

“It is to optimise recovery within the next five years,” according to the Rehabilitation and Restructuring Plan for Tabung Haji.

Should these measures be taken, this would result in a restructured balance sheet for Tabung Haji, where its assets equal liabilities come Jan 1, 2019.

As of now, Tabung Haji’s growing assets and liabilities gap is estimated at more than RM9bil.

The proposed plan is for the government to issue a sukuk (Islamic bond) worth RM10bil and redeemable convertible preference shares (RCPS) worth RM9.9bil through the SPV.

“This amount is meant to match Tabung Haji’s under-performing assets which have an adjusted value of up to RM19.9bil, but are carrying unrealised losses of more than RM9bil,” the report stated adding while the sukuk will not be guaranteed by the government, it will be under the Finance Ministry.

To build up Tabung Haji’s cash position, the proposed plan called for raising of some RM20bil in ready cash. Among the measures outlined is a RM10bil temporary Islamic shortterm borrowing with Bank Negara.

Another measure is for Tabung Haji to redeem a RM500mil sukuk in BIMB Holdings.

The fund should also prepare strategic partner banks to manage withdrawals.

In order to improve Tabung Haji’s financial muscle and reputation, the proposal calls for the fund to be placed under the supervision of Bank Negara for prudential measures.

The sukuk is proposed to be a zero coupon bond, but carries an annual return of 5% as it will be produced at a discount to its par value of RM12.8bil. The sukuk matures in seven years. The RCPS will carry no dividend rate or maturity date to avoid a further burden on the government.

The proposal noted that the continuous asset bleeding on the back of an underperforming equity market, bad investment decisions and lack of robust risk management resulted in a widening gap between the assets and liabilities of the fund.

In terms of Tabung Haji’s under-perfoming assets worth RM19.9bil, it comprised RM17.4bil in investments at book cost, and RM2.5bil in properties and lands.

Moving forward, Tabung Haji will craft a new business model and risk management in generating sustainable profit to distribute its hibah from 2019.