Parliament approves converting RM165m govt loan to UDA into equity

• “The increase in UDA’s equity to RM500 million will also reduce the debt-to-equity ratio by 60.5% from 1.19 times to 0.47 times, thus making the decision to convert the debt a win-win situation and enable UDA to continue operations.”

KUALA LUMPUR (April 4): The government’s proposal to convert RM165.28 million worth of government loans to property developer UDA Holdings Bhd into equity investment at RM1 per share has received the Parliament’s nod.

Dewan Rakyat passed the motion on Tuesday (April 4) after it was tabled by Deputy Finance Minister I Datuk Seri Ahmad Maslan. UDA is wholly owned by the Minister of Finance Inc and is involved in property investment and management, facility management and hospitality, besides property development.

In tabling the motion, Ahmad said the purpose of the exercise is to reduce UDA’s financial burden and ensure the company, under the purview of the Ministry of Entrepreneur and Cooperatives Development, continues to implement development projects for the economic growth of the country as well as safeguard the interest of bumiputera in urban areas.

“UDA needs to record the sale of Bukit Bintang Plaza to Zurah Permai Sdn Bhd amounting to RM354 million as revenue in their records, but as of August 2022, UDA has only received RM228 million — with RM126 million that was supposed to be paid in July 2022 yet to be received,” the deputy finance minister told Dewan Rakyat.

“This has indirectly affected UDA’s cash flow in addition to affecting the group’s five-year business plan, which in turn has a negative impact on UDA’s cash flow projections,” he added.

The debt-to-equity conversion would reduce UDA’s liabilities and increase its equity to RM500 million, improving its gearing level and enabling further financing for its projects, he said.

“The increase in UDA’s equity to RM500 million will also reduce the debt-to-equity ratio by 60.5% from 1.19 times to 0.47 times, thus making the decision to convert the debt a win-win situation and enable UDA to continue operations,” he added.

The debt-to-equity conversion exercise is conducted in accordance with paragraph 8(3)(a)(iv) of the Financial Procedure Act 1957.

UDA, formerly known as the Urban Development Authority, was established in 1971 with the mission of advancing the nation’s urban development.

The company’s five-year plan, from 2023 to 2027, comprises the launch of 72 new projects with a cumulative gross development value (GDV) of RM9 billion.

It recently launched its maiden sukuk wakalah programme with a nominal value of up to RM1 billion, comprising the issuance of Islamic medium-term notes (IMTNs) and Islamic commercial papers (ICPs), to fund its developments.