Role and Development of DANAHARTA

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Role and Development of DANAHARTA

Ahmad Zuhairi Mohd Amin Bank Negara Malaysia 24
May 2005
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Agenda

• Background and Overview
• Approach
• Progress
• Going Forward

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Background and Overview

• Pengurusan Danaharta Nasional Berhad
  ("Danaharta") was established by the Malaysian
  Government in June 1998 to address the
  non-performing loans ("NPLs") problem plaguing
  the banking system during the Asian financial
  crisis.
• The NPL resolution agency, euphemistically known
  as the national asset management company ("AMC"),
  was established as a pre-emptive measure to avert
  a failure in the banking system.
• Danaharta's objectives are
• to remove NPLs from the banking system to allow
  banks to concentrate on their core business of
  lending to viable borrowers (completed in March
  2001)
• to maximise recovery from its NPL portfolio
  (ongoing till 2005)

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Background and Overview (continued)

• Danaharta started removing NPLs from the
  financial system in September 1998 and completed
  the task in March 2001. This was done via two
  modes
• Acquired NPLs
• Danaharta acquired NPLs from almost 70 financial
  institutions ("FIs") nationwide
• Total fair purchase price of NPLs RM8.94 billion
• Payment Via issuance of zero-coupon Danaharta
  bonds and cash
• Managed NPLs
• Danaharta was assigned the NPLs of the now
  defunct Sime Bank Berhad Group ("Sime Bank
  Group") and Bank Bumiputra Malaysia Berhad ("BBMB
  Group") to manage on the Governments behalf.
• Total price paid by Danaharta Nil

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Agenda

• Background and Overview
• Approach
• Progress
• Going Forward

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Approach
Remove NPLs from banking system
Maximise recovery value of NPLs
Asset management approach
Viable loans
Non viable loans

• Management of borrower
• Management of collateral

• Restructuring
• Rehabilitation

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Approach (continued)

• In dealing with the NPLs, Danaharta adopts the
  true AMC approach that is to actively manage each
  loan account to attain maximum recovery. Every
  NPL account is reviewed to determine the most
  appropriate recovery strategy.
• With the implementation of the recovery
  strategies, recoveries are then received in the
  form of cash and non-cash assets i.e. securities,
  properties and restructured loans.
• Ultimately, all non-cash recovery assets will be
  converted into cash, part of which would be
  distributed to the FIs that had sold NPLs to
  Danaharta (as required by the surplus sharing
  arrangements agreed upon during NPL acquisition)
  and to the Government (in respect of the Managed
  NPLs).

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Agenda

• Background and Overview
• Approach
• Progress
• Going Forward

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More than 90 of total lifetime recovery target
collected

• Danaharta expects to collect about RM30 billion
  over its lifetime. As at the end of 2004,
  Danaharta had already collected more than 90 of
  the total lifetime recovery target of
  approximately RM30 billion, which is equivalent
  to a recovery rate of 59 comprising 50 for
  acquired NPLs and 65 for managed NPLs.
• By 31 December 2004, it had received recovery
  amounting to RM29.03 billion, of which 81 had
  been converted into cash.
• Danaharta had a total cash and cash equivalents
  of RM0.96 billion as at 31 December 2004.
  Danaharta had also redeemed RM10.345 billion of
  the RM11.14 billion bonds it issued.

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Agenda

• Background and Overview
• Approach
• Progress
• Going Forward

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Going forward

• Danaharta is targeting to wind down its
  operations by end 2005. Nevertheless, Danaharta's
  efforts will continue to strive to achieve
  maximum recovery from its NPLs.
• Going forward, Danaharta will focus on collecting
  recovery, converting non-cash recovery assets
  into cash and redeeming the final tranches of
  bonds amounting to RM0.795 billion matured on 31
  March 2005.
• Being a national AMC, Danaharta is likely to
  record a loss at its close, which will be a cost
  to be borne by the Government.
• However, this cost is small compared to the
  greater losses Malaysia would have suffered
  economically and socially had the banking system
  in the country collapsed. Nonetheless, Danaharta
  strives to minimise its eventual cost through
  maximizing the NPL recovery value.

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For more information

• Please visit the following website
• Bank Negara Malaysia (Central Bank of Malaysia)
• http//www.bnm.gov.my
• Pengurusan Danaharta Nasional Berhad
• http//www.danaharta.com.my

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Thank you