Banks must be ready for a haircut: Dr M
The Star  04/08/2001  By Mokhtar Hanafiah

LOCAL banks which have taken the risk to lend money must be prepared to take a "haircut" if their client companies run into difficulties and cannot repay their loans, Datuk Seri Dr Mahathir Mohamad said.

The prime minister said the government had to restructure these ailing companies as they were losing money.

"The banks have made the decision to lend money and when things go sour, they must take a haircut. Banks take a risk when they lend and they must accept that when they lend money, they run a risk," Dr Mahathir told a press conference after presenting awards to about 75 treasury staff members.

On the corporate restructuring exercises, Dr Mahathir said the government would not restructure certain companies only, but would also look at other firms which had been affected by the ringgit devaluation.

"We will look at all ailing companies. Our duty is to help revive them. We have set up Danaharta, Danamodal and the CDRC (Corporate Debt Restructuring Committee) to do this," he said.

On whether the government is going to rescue more companies, he said: "We are not rescuing more companies, we are restructuring companies."

Dr Mahthir said the government had to help the troubled firms not because it wanted to rescue the businessmen concerned, but because it had a commitment to the workers and also to ensure the success of the National Economic Policy.

Dr Mahathir noted that these companies suffered not because of their own fault but because of the devaluation of the currency and the subsequent fall in share prices.

He said many of the ailing firms had assets worth much more than reflected in their share prices on the KLSE now.

"Today, even the best-run companies will fail if you devalue the currency. If you devalue the American dollar by 50%, even General Motors will fail," he said.

Dr Mahathir said the government had never given wealth to individuals, only the opportunities.

"But they are not so good, they mismanaged. At the same time, during the economic downturn, many people failed in their businesses," he said.

Dr Mahathir said that even with the setting-up of Pengurusan Danaharta Nasional Bhd, Danamodal Nasional Bhd and the CDRC, some companies were still in serious trouble.

"Therefore, if a businessman is unable to handle the business because of the size of the problem, I think he should relinquish his position in the company," he said.

On whether Renong Bhd executive chairman Tan Sri Halim Saad is under investigation, Dr Mahathir said: "No, he is not under investigation but he is not in charge (of the Renong group) anymore; that's all."

The government had announced recently that it would take over the troubled industrial and infrastructure giant Renong-UEM group, an excercise which is expected to result in United Engineers (M) Bhd (UEM) being delisted from the KLSE.

The proposed takeover will involve restructuring the debts of the Renong-UEM group, said to be the nation's biggest debtor.