The transfer of Lembaga Tabung Haji’s (TH) under-performing assets to a Special Purpose Vehicle (SPV) will normalise its balance sheet and speed up its financial recovery, its Group Managing Director and Chief Executive Officer, Dato’ Sri Zukri Samat said today.
Speaking at a media briefing, he said an estimated RM19.9 billion of assets, comprising a mix of properties and equities, would be transferred to the SPV, which would be owned by the Government.
The assets to be carved out would be identified using two criteria. For properties, it would be those with a yield of less than 2%, and for equities, the value impaired would have exceeded 20%.
In exchange for the assets, the SPV would issue RM10.0 billion 7-year Sukuk and RM9.9 billion of Islamic Redeemable Convertible Preference Shares (RCPS-i).
TH is targeting to complete the exercise by end of December. Once the transfer is completed, TH would have a clean balance sheet with assets equal to liabilities.
With a restructured balance sheet, TH would be poised to move forward to generate sustainable profits to distribute hibah, and this would be in full compliance with the Tabung Haji Act 1995, Dato’ Sri Zukri added.
At the briefing he also shared details of measures to be taken to strengthen TH’s governance, operations and to refine its business model.
“Another major component of the Turnaround Plan, is our risk management capability, which is critical to the quality of our investments. We are in the process of instituting a risk management framework to ensure that future investment policies will be suited to our new business model. In this regard, we have hired a very experienced new Head of Risk Management to ensure we have a very robust evaluation process, before we undertake new investments.”
He said that TH is also reviewing its investment portfolio and may exit some sectors which are not doing well.
“On the other hand, our hajj operations, which has received par excellence rating by all external parties, will continue as usual. Having said that, we are looking at areas, where we can reduce the cost of hajj operations, so that we can contain the costs of performing the hajj. In fact, cost-cutting measures have been initiated to reduce overheads.”
He said TH welcomed the decision by the Government to put TH under the supervision of Bank Negara Malaysia, because the Central Bank has a very robust risk management and liquidity framework, which institutions under its supervision must comply. This would enhance confidence of depositors.