S&P Views First Round of Msian Bank Recap. Positively.NEW YORK--(BUSINESS WIRE)--Oct. 7, 1998--Standard & Poor's views positively the recent announcement by Danamodal Nasional Berhad (Danamodal) that it will invest Malaysian ringgit The ringgit (unofficially known as the Malaysian dollar), is the currency of Malaysia. It is divided into 100 sen (cents) and its currency code is MYR (Malaysian Ringgit). (RM) 3.3 billion (US$868 million) of new equity and quasi-equity in 10 Malaysian banks and finance companies. Danamodal, with a proposed investment budget of RM16 billion, is the Malaysian government's wholly owned vehicle for the recapitalization Recapitalization Restructuring a company's debt and equity mixture often with the aim of making a company's capital structure more stable. Notes: Companies often want to diversify their debt-to-equity ratio to improve liquidity. of financial institutions. Danamodal announced on Sept. 3, 1998 its intention to provide RM1.5 billion (US$395 million) of equity for the merger between RHB Bank RHB Bank Berhad (also known as the Rashid Hussein Bank) is a bank based in Kuala Lumpur, Malaysia. It specializes in commercial banking, corporate banking and international banking services. Berhad (BB+/Negative/B) and the troubled Sime Bank Berhad (CCCpi/-/-). It appears that the 10 financial institutions selected by Danamodal are the Malaysian banks and finance companies that most require recapitalization. These institutions, almost without exception, recently have reported either high nonperforming loans (NPLs), low provisioning, or low capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. . Danamodal's move is a good first step in the rehabilitation rehabilitation: see physical therapy. of Malaysia's financial sector; however, the total RM4.8 billion announced thus far remains below the RM36 billion (US$9.5 billion) that Standard & Poor's believes is needed for the total recapitalization of the Malaysian banking industry. Standard & Poor's forecasts the ratio of gross NPLs (on a three-month past-due basis)-to-total gross loans (net of loans sold to Cagamas) to peak at 30%-32% by the end of 1999 for the banking industry, an expectation that is reinforced by continuing loan-quality deterioration de·te·ri·o·ra·tion n. The process or condition of becoming worse. in the system. The central bank recently revealed that the system NPL 1. NPL - New Programming Language. IBM's original (temporary) name for PL/I, changed due to conflict with England's "National Physical Laboratory." MPL and MPPL were considered before settling on PL/I. Sammet 1969, p.542. 2. ratio (on a three-month past-due basis) hit 15.0% at July 1998, continuing the steady upward trend since late 1997. Arab-Malaysian Merchant Bank Berhad (AMMB) is one of the beneficiaries of Danamodal's capital injection plan. Pending further details from the merchant bank on the amount of capital and the final form of capital to be received, however, the 'B+' long-term and 'C' short-term ratings on AMMB remain on CreditWatch with negative implications. Standard & Poor's expects to resolve the CreditWatch by the end of October 1998, Standard & Poor's said. -- CreditWire |
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