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Corporate Debt Restructuring by Malaysia’s Central Bank

Corporate Debt Restructuring by Malaysia’s Central Bank

On the 23rd of July 2009, Bank Negara Malaysia announced the operations commencement of the Corporate Debt Restructuring Committee (CDRC) in Malaysia, allowing corporate borrowers and creditors to work out debt resolutions without having the need to officiate legal proceedings. According to CDRC, this voluntary forum for large corporations who want to negotiate obligations their distressed debts can do so in the forum – And they’ve succeeded in assisting 57 companies and RM45.8 billion in total outstanding debts.

Corporate debt structuring literally means a company, facing financial burdens and is having difficulty in meeting financial obligations.

The debt restructuring process will consist of reorganizing the financially distressed company’s outstanding obligations to reduce financial burden (by debts). This could mean decreasing rates paid and giving more time for the company to pay back. At times, some of these debts may be revoked by its creditors in exchange for an equity position in the company.

Usually, when this financially distressed company poses a high risk of going into bankruptcy, it can negotiate with its creditors to reduce these burdens and avoid going bankrupt. Legally, it’s possible for such a company to acquire protection from creditors, with hopes of renegotiating the terms on the debt agreement – Which is also termed as an Amended PN17 company in Malaysia.

The PN17 company

In Malaysia, an Amended PN17 company means a publicly listed company has negative net tangible asset due to falling profits, or companies without a core business. These companies, who were once classified as a PN17 company, has submitted a plan to regularize its condition pursuant to Section 212 of the Capital Market and Services Act 2007, and they are bound to undertake a corporate regularization plan to significantly change its business direction or policy and submit it to the Securities Commission Malaysia (SC) for approval.

BNM (Bank Negara Malaysia) also announced its appointment of members in the CDRC:

1. Yang Berbahagia Dato’ Sri Abdul Hamidy Abdul Hafiz (Chairman)

2. Yang Berbahagia Dato’ Mohammed Hussein

3. Yang Berbahagia Dato’ Muhammad bin Ibrahim

4. Yang Berbahagia Datuk Ranjit Ajit Singh

5. Mr. Abdul Kadir Kassim

6. Mr. Ahmad Badri bin Mohd Zahir

7. Mr. Nik Mohd Hasyudeen Yusoff

8. Mr. Philip Tan Puay Koon

And list of criteria for companies seeking to resolve their debt through CDRC are:

* Debt obligations of at least RM100 million,

* At least 3 financial creditors (banks or Private Debt Securities),

* Not already in receivership or liquidation.

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