Should PNB give Sapura more loans?

KUALA LUMPUR March 23 – Everybody would have known by now the sheer financial pressure faced by oil and gas giant Sapura Energy Berhad.

Sapura which was one of the world's top five oil and gas firms, has literally fallen from grace falling flat on its face saddled with a massive net loss of almost RM9 billion in 2021 alone.

Never before has any corporate in Malaysia amassed such a staggering loss said to be the biggest in corporate Malaysia.

But the most important question right now is - what will it's 40 percent majority owner do next?

All eyes are on it's main shareholder Permodalan Nasional Bhd (PNB), deducing it's every move with regards to Sapura.

Will the country's largest state-owned fund manager continue to provide loans or to put it crudely, bailout Sapura?

Or should PNB allow Sapura to be declared bankrupt and be liquidated by its creditors.

Or should PNB be dutybound to its unit trust holders by admitting that Sapura was a bad investment, refrain from investing further in the company, shrug it off and move on.

RELATED ARTICLE: Sapura Energy in dire straits, PNB must now answer investors

To recap, PNB had in 2018 provided Sapura a RM2 billion loan via a fundraising exercise.

In a statement on Monday, PNB had said that the RM2 billion taken by Sapura will not affect its overall assets under management of some RM370 billion.

Good money chasing bad money?

When it comes to loans, it is bad practise in the banking industry to use good money to chase bad money - meaning a fresh loan should not be extended until an existing debt is settled.

"So, in this case, it is highly unlikely that PNB will extend another lifeline for Sapura.

It is unwise to use the rakyat's money to bail out Sapura to benefit a few corporate leaders, " a source close to PNB told DagangNews.com.

He also clarified an erroneous posting by Datuk Sri Najib Razak who said that the bad investment in Sapura will affect 10.4 million ASB unit trust holders.

"He is just plucking facts and figures from thin air.

The loss will be borne by PNB which owns 40 percent of Sapura and not by the ASB depositors.

In the register of shareholders, ASB funds are parked under Yayasan Pelaburan Bumiputera - Skim ASB which has got nothing to do with PNB the parent," he clarified.

Rescuing Sapura's 10,000 workers

Admittedly, the situation is critical with many analysts describing Sapura on the verge of bankruptcy.

To make matters worse, Sapura also employs an estimated 10,000 workers which are now obviously in a lurch.

If PNB or any other "white knights" want to "rescue" Sapura, it must do so for the right reason.

The white knight must have a long-term aim to turn around the company for the benefit of PNB's investors which are ultimately the rakyat.

PNB must not rescue Sapura to benefit any corporate leader or other cronies.

It must do so to benefit all of its unit holders spanning from ASB, ASB2, Amanah Wawasan and others.

Rescuing and bailing out companies is not new in corporate Malaysia

Although it never admitted to doing so, it is an open secret that the government had bailed out ailing companies before.

They include Malaysia Airlines and AirAsia.

At the global level, General Motors, Ford Motor Company and AIA were also "rescued" to name a few.

So should PNB continue to help Sapura?

The ball is in PNB's court. – DagangNews.com