RM6.5b offer for Selangor water bonds?

Kuala Lumpur: The federal government is poised to make a RM6.5 billion offer today to buy over the Selangor water debts from bondholders.
 
It is understood that the offer will be made through the federal government and Pengurusan Aset Air Bhd (PAAB), the government's water asset management company.

The offer is a RM200 million discount to the value of the outstanding water bonds of RM6.7 billion.

"The federal government is stepping in to buy over the bonds with a slight discount to what the lenders want. The lenders will have to mark the losses in their book," an industry sources told Business Times.

Lenders include Maybank Investment Bank and CIMB Group, which hold about RM1 billion of the outstanding water bonds. Insurance firms and pension funds hold about RM2 billion each while the rest is held by fund managers such as AmInvestment, CIMB Principal, RHB Asset Management and Public Mutual.

A source said the government is dealing directly with the lenders and has been in heavy discussions following the recent approval from the Minister of Finance Inc to take over the bonds.

"The ultimate aim is for the government to own the assets and debts of the water companies in Selangor in an effort to consolidate the water industry," the source said.

This is the first phase of the consolidation as by June 2, the government is expected to make an offer to buy the water assets in Penang for more than RM3 billion.

The Selangor asset owners are Puncak Niaga (M) Sdn Bhd and Syarikat Bekalan Air Selangor Sdn Bhd (Syabas) - both controlled by Puncak Niaga Holdings Bhd - as well as Syarikat Pengeluar Air Sungai Selangor Bhd (Splash) and Konsortium Abass Sdn Bhd.

The source said there is a possibility the debt could be converted into shares at a later stage.

"This is one of the options being discussed," he said.

The national water restructuring plan is meant to relieve the states and concessionaires of the heavy burden of funding future water infrastructure development.

After the restructuring, the responsibility falls under the purview of the federal government and PAAB, which is entrusted to buy over the states' water assets, making them asset-light and allowing them to focus on operations and maintenance.