BHIC Shareholders To Vote On Debt Settlements, Updated.

Work on the LCS as shown during the PAC proceedings made public on November 14 2023. Screenshot from PAC report November 14.

SHAH ALAM: Boustead Heavy Engineering Corporation Bhd (BHIC) is scheduled to hold an extraordinary general meeting this Friday. Among others the public listed company shareholders will vote the proposed disposal of Boustead Naval Shipyard (BNS) to MOF Incorporated company, Ocean Sunshine Bhd (OSB).

The resolutions are likely to be passed at the EGM which will be held virtually. The EGM will be held just two days before the deadline for the disposal of BNS to OSB.

In a circular to shareholders and posted on Bursa Malaysia, BHIC stated that it expected the disposal exercise will take place by the first quarter of 2024. Based on this, I believed that the full privatisation of BNS will only take place next year.

Anyhow apart from voting on the proposed disposal to BNS, there are other things shareholders have to vote on among them a proposed debt disposal via the issuance of new shares of BHIC. As I am not a financial analyst, please go to Bursa Malaysia or BHIC websites for a look on the circular to shareholders and notice for the EGM.

However, I must point out among the reasons for the debt disposals were the fact that BHIC had debts due to a failure of one its subsidiary, Boustead Penang Shipyard (BPS) to complete a contract to build three tankers which was awarded to it. BPS -located at Pulau Jerejak – was returned to Penang government (date unknown) as the shipyard could no longer build big ships and offshore platforms once the second Penang bridge was completed in 2014. BHIC had taken financing facilities to build the tankers on behalf of the subsidiary and when it failed to deliver the tankers on time, the contract was cancelled. It then left BHIC to settle the debts and now it had to undertake the debt proposal to settle the loans. If you want more details go the websites I mentioned above.

The circular gave a detailed explaination on the BNS disposal though.

Background of the Proposed Disposal of BNS
We had on 21 August 2023, announced that our indirect wholly-owned subsidiary, Perstim
Industries Sdn Bhd had entered into the BNS SSA with Ocean Sunshine Berhad in respect of
the proposed disposal of 27,000,001 ordinary shares representing approximately 20.77% of
the equity interest in BNS. BNS is also our associated company. The BNS SSA is expected to
be completed within the 1st quarter of 2024. One of the conditions precedent for the completion
of BNS SSA is the execution of the ITRRA to be entered into between BHIC (as authorised by
its relevant subsidiaries to enter into the ITRRA on their behalf) and BNS for the repayment of
a sum of RM383,939,549 and/or such other sum due and owing by BNS to BHIC and its
relevant subsidiaries (as detailed below) which shall be subjected to verification in the due
diligence review and to be mutually agreed thereto by the parties to the ITRRA, being the total
repayment sum owing by BNS to BHIC and its relevant subsidiaries.
9
10
As at the LPD, the repayment sum of RM383,939,549 under the ITRRA are owed by BNS to
our Company and the following relevant subsidiaries (“Relevant Subsidiaries”):
 BPS;
 BHIC Electronic and Technologies Sdn Bhd;
 BHIC Allied Defence Technology Sdn Bhd;
 BHIC Defence Techservices Sdn Bhd;
 BHIC Submarine Engineering Services Sdn Bhd;
 BHIC Navaltech Sdn Bhd; and
 BHIC Marine Technology Academy Sdn Bhd.
Any delay in the Proposed Disposal of BNS will not result in any material impact to our Group
as we have already fully impaired our Company’s cost of investment in BNS and BNS’s carrying
value in our Group is nil due to equity accounting of BNS’s losses in previous years. The gain
on disposal will be RM1.00 once completed. Further, if the Proposed Disposal of BNS is
terminated, BNS will remain as our Group’s associate company.
The amount to be repaid by BNS under the ITRRA to our Group is uncertain as our Company
is still in negotiations with both BNS and Ocean Sunshine Berhad. Once the amount to be
repaid is finalised, our Company will be required to write-off any difference between the finalised
amount and the amount owing. Pending execution of the ITRRA, such amount owing may be
subject to expected credit loss assessment in our Group’s financial statements.
Notwithstanding the above, our Company has the right to legal recourse against BNS to recover
the amount owing. Our Company will utilise any amounts received from BNS under the ITRRA
for the redemption of the preference shares and business operations.
In relation to whether the Proposed Disposal of BNS will trigger PN 17, our Company will assess
our position following the completion of the Proposed Disposal of BNS and the agreed outcome
of the ITRRA. For avoidance of doubt, the Proposed Debt Settlements will not result in our
Company becoming a PN 17 Issuer.
In the past, BHIC was able to benefit from the sales and cash flows generated from trade
activities related to BNS’s business operations. However, since commencement of discussions
on the Proposed Disposal of BNS, these trade activities have ceased.

BHIC stated in the circular even if BNS was disposed, the company was still to benefit from the defence related contract namely the Royal Malaysian Navy’s submarine – the refit and the in-service support contracts and maintenance of helicopters for the Royal Malaysian Air Force.

Our Company has established our presence in the submarine, aerospace, weapons, and
combat systems sectors, delivering MRO services to high-profile clients such as the Royal
Malaysian Air Force (RMAF), Royal Malaysian Navy (“RMN”) and the Malaysian Armed Forces.
We intend to focus on ensuring the timely delivery of projects within cost expectations for the
existing contracts awarded by Ministry of Defence for the Interim In-Service Support (MRO
services) to the RMN submarines as well as for its Submarine Facilities Upkeep (maintenance
of the naval shipyard) which are expected to contribute positively to our Group’s earnings in
FYE 2023.
Further, being a strategic investee company of LTAT and in line with its Strategic Plan 2023-
2025 (MAMPAN25), we will endeavour to secure other defence/government contracts and
explore viable opportunities to expand its services into the private sector in-line with our areas
of technical expertise to further strengthen our prospects. This will be supported by our
established facilities which include an aeroservices centre, coupled with our experienced
personnel in maintenance. These strategic plans are to propel our Company towards becoming
a high-performing and sustainable organisation

It must be noted that this story was based on a release by BHIC on December 14. I was told that the BNS issue was mentioned in the release as part of the debt settlements which were to be voted in the EGM. And the BNS part was never to be voted by the shareholders.

HT to DM.

— Malaysian Defence

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28 Comments

  1. “BHIC Shareholders To Vote”
    Do they even have the right to vote yes or no, considering a loss making company and with ‘orders’ to be absorbed by the Govt?

    “BHIC had debts due to a failure of one its subsidiary, BPS”
    But the problem is BNS not BHIC tho. BNS also facing debts because it could not financially complete the LCS contract with the remainder fund still left. BHIC had their own debt problems but I dont see why its got anything to do with BNS. If the takeover is to happen, Govt only should take on the debts of BNS and not the whole BHIC.

    “the company was still to benefit from the defence related contract”
    If BNS is nationalised, the sub refit should go back to them and no longer with BHIC/Boustead DCNS Naval.

  2. No way OSB/government/taxpayers takes up BNS and still has to fully pay BHIC RM384 million. BNS needs to take up the tab too as the government is taking over their failed parts of business.

    If not, I will want some barter of assets/services to offset the RM384 million. MHS EC225LP for TUDM, discounts for TUDM EC725 maintenance and Scorpene 2nd Refit maybe?

  3. Another rescue. With the dismal performance still dream of getting future contracts. The rescues will never end like this. MRO is OK. But no more new ship builts. Never ever

  4. If not, I will want some barter of assets/services to offset”
    Somehow this logic doesn’t make sense to me…..

  5. “MHS EC225LP for TUDM”
    Give also they dont want. TUDM earmarked to get dozen brand new CSAR equipped choppers so why would they want used (with potential GB problems)?

    “Scorpene 2nd Refit maybe?”
    With BNS nationalised, this should go back to TLDM do inhouse.

    BHIC will need to settle their own shits, not give to Govt/taxpayer monies to resolve it. Boustead Holdings have other profitable subs & land they could lelong off. They also (likely) have 3 partially completed tankers from the failed deal that can be sold to MISC in offsetting the debt.

    Ultimately there should no longer be any private sacred cows that has to be rescued by Govt when they make huge mistakes, just let them die.

  6. After the big huu haa there seem to be no more news on big ticket buys anymore.
    TUDM LCA
    TLDM LMS2
    TDM SPH, 4×4 + 6×6 APC
    Polis mothership
    MMEA USCG donation (did we send a team to evaluate?)
    Too much silence…

  7. Boustead Holdings is 74% owned by LTAT. LTAT is the pension fund for MAF. If asking BHIC which a subsidiary of Boustead to provide freebies and cough up their own money, its indirectly asking LTAT, the MAF pensioners, to give freebies and cough up their own money. This is the same issue with Lembaga TH. If the government does not absorb the debt, it is the Lembagas’ that will have to absorb it. If Boustead starts selling assets, then it is asking LTAT to sell assets. Not all investments are incompatible with a pension fund so the investment needs restructuring. Unfortunately, since the ultimate owners are Boards or Lembagas, the debt needs to be taken of their books and their investments need to be restructured. You can keep the debt on their books, but it only results in income diverted to paying off debts rather than fulfilling the Lembaga’s objectives. Once could say if that’s the case, why not keep giving BNS contracts? Because LTAT is a pension fund and military shipbuilding is considered high risk and not sustainable business in Malaysia – it will never be a business that is compatible with pension funds. I only hope this time they do it right with the Lembagas’.

  8. @ Luqman

    “Somehow this logic doesn’t make sense to me…..”

    Government is already doing BHIC a favor by taking over BNS from BHIC, of which to continue paying all the staff to complete the Gowinds, will have zero profits whatsoever. I would understand if the government taking over liabilites of BNS towards OTHER COMPANIES, but liabilities of BNS towards BHIC own companies? Sorry, BHIC needs to take up part of the liabilities too.

    @ joe

    “With BNS nationalised, this should go back to TLDM do inhouse”

    Please understand that BHIC Submarine Engineering Services in Sepanggar is not the same company as Boustead Naval Shipyard Lumut. The government is only taking over BNS Lumut, and BHIC Submarine Engineering Services will still continue to be a BHIC subsidiary.

    “Too much silence…”
    New MENHAN needs time to understand all the current situation in MINDEF. If even a mlitary enthusiast still don’t understand lots of stuff about our military, what more someone that has no prior interest in the same. LCA is a done deal, nothing to say anymore except if want to buy batch 2, of which the budget will start in 2026. Others, still have 2 years to go for Rancangan Malaysia ke 12 2021-2025 budget. A new MENHAN, with probably a different priority than the previous MENHAN would also be an opportunity for those in the military to tweak or change any previous requests or requirements.

  9. @kel
    “If the government does not absorb the debt, it is the Lembagas’ that will have to absorb it.”
    When LGE was Fin Min (under PH1.0) there were no sacred cows untouched and TH had a lot of fire sales under orders during his time. Yes it did give a bad impression the then Govt was selling out to foreign entities buying all these up, but its not like the current one has a better image with the rakyat anyhow so why they need to worry about selling even more assets? TH should go back doing their what they were setup to do anyways.

    @Hulubalang
    “BHIC Submarine Engineering Services in Sepanggar is not the same company”
    Granted but that was because TLDM/Govt dont have a yard facility. Now they do. And its not like BHIC was doing a good job at it either (see their penalty arbitration).

    “LCA is a done deal”
    On paper yes, but nothing after that. Like did we start sending training team?
    The rest arent new, mostly have had tenders going out but til date no news. Granted the current Menhan is newly minted but such decisions would have already been finalised prior to him coming onboard (or else just needs his rubber stamp). So whats the hold up. Were soon moving into 2024 so it cant be everything pushed to 2025 right?

  10. The LCA project team I posted here has gone to South Korea. The one you said going on free holiday. Its the same for the MPA project team.

    Why do need to send the LCA training team there now? The planes are not yet ready.

  11. “Why do need to send the LCA training team there now? The planes are not yet ready.”
    Different than my explanation for the SPH. While for that we dont even know what type of equipment we are going to buy so whats the point of setting up phantom regiments and sending them around the world to train on various SPH systems, at least the LCA model has already been chosen so now we can start activating the team for training. The Polish orders (same version for ours) are underway so their team would also be in training by now, hence we can ride on their program for our flyboys. PolAF also flown the Mig29 so there can be a lot of common between us to share knowledge & info, building camaraderie and who knows perhaps laying a future for exchanges.

    See the difference? Its not like Im saying no need to, but there is a time for everything and too early meant wasting people time & rakyat money.

  12. Perhaps people forgotten FA-50 Block 20 does not exist today. The first Block 20 is going to Poland in 2025. Since RMAF ordered the Block 20, not Block 10 and upgrade later, RMAF will only start receiving the FA-50 in 2026 – after Poland. Better to keep tabs on 1) the MPA, and 2) the Anka drones which should be in production now and joining RMAF earlier than the LCA.

  13. Hulubalang
    “Government is already doing BHIC a favor by taking over BNS from BHIC, of which to continue paying all the staff to complete the Gowinds, will have zero profits whatsoever. I would understand if the government taking over liabilites of BNS towards OTHER COMPANIES, but liabilities of BNS towards BHIC own companies? Sorry, BHIC needs to take up part of the liabilities too.”

    LTAT is not a privately run pension fund but rather it is administered by the gov on behalf of the pensioners and the gov are the one that hired those clown that mismanaged BHIC in the first place.

    Thus from the pensioners point of view, it’s entirely gov fault & they don’t want to take a financial beating for fault made by the gov and any politicians worth their salt would agree with them.

  14. @Kel
    “The first Block 20 is going to Poland in 2025”
    Poland ady received the first 8 LCA and supposed to get 12 more by end this year. In total they ordered 36 units so the training program would have been underway. We can start to train now becoz we will need to draw out the LCA playbook to suit our needs.

    @Zaft
    “any politicians worth their salt would agree with them”
    Except any politician aligned with the current Govt wouldnt do that unless they want political suicide.

  15. LTAT is equivalent to EPF so their more like a sovereign fund, hence the companies they gave rise are akin to GLCs. So staffs under them are semi-civil servants? Im not quite sure.

    Technically those hired can be technocrats from private sectors but the top positions esp BOD & CEO are typically Govt appointees & often are sweet posting for politicians they cannot fit into Cabinet yet too precious (read: influential) to ignore and cast aside. Often they are the ones that screw up with misguided directions rather than those working there full time.

  16. @ kel

    “Perhaps people forgotten FA-50 Block 20 does not exist today”

    TUDM FA-50 Block 20 already entered fabrication/production phase at KAI.
    https://www.kosmo.com.my/2023/12/07/perolehan-pesawat-tempur-fa-50-mulai-oktober-2026/

    KAI is already testing Block 20 systems
    https://pbs.twimg.com/media/FvxjtJPaMAA4l3i.jpg

    As usual for the Koreans (you will know their work culture if you have worked with them before), the October 2026 delivery date would be comfortably beaten. All of the delivery to Poland so far is much more earlier than all the dates that they committed.

  17. Two of the people in the project team are pilots, they will start training with KAI aircraft to familiarise themselves on the aircraft and will be the one who will say that MY aircraft are good to go once they are completed. Of course, a proper training cadre will be sent to South Korea nearer to the time when the first aircraft are ready for delivery.

    Polish Air Force did the same thing, the only difference is that they took over planes that was supposed to be delivered to the South Korean AF so they got expedited delivery as that was their plan in the first place. Get whatever planes we can get and then get the ones we actually ones, the Poles said. Hey, it’s their money.

    We did not do that as we wanted only the Block 20 as we already got the Hawks already and are still paying for it, maintenance, and other stuff and not the aircraft.

  18. Polish Air Force will also convert all its current FA-50GF into full FA-50PL Block 20 when they have received all their planes.

    “The FA-50GFs will later be upgraded to Block 20 standards in the future, making the entirety of Poland’s FA-50 fleet consist of the later Block 20 variant”
    https://theaviationist.com/2023/05/28/updates-on-the-fa-50pl-and-polands-interest-in-kf-21-block-ii/

    So Block 20 spec is actually backwards compatible with all FA-50, not something that is unique to new build airframes only.

    That means existing FA-50 or T-50 can be modified to FA-50 Block 20 standards.

  19. Block 20 is unique to FA50. Which is physically different from T50 and TA50. Only FA50s’ can be upgraded to Block 20.

  20. Block 20 is specifically for the FA-50. The FA-50, TA-50 and T-50 is dimension wise the same. But the max take-off weight differences should tell. One is the larger internal fuel tanks of the FA-50 vs the basic T variant – hence the longer range. Another is, well the T-50 doesn’t have an internal 20mm gun. Also it appears the T-50’s smaller radome precludes a more powerful radar without structural work. One could come up with a solution to bring T-50s to FA-50 Block 20 capabilities, but why would anyone do that to a basic trainer. The more likely upgrades is TA-50 to FA-50 Block 20. But you’ll need to ask KAI to come up with the solution which they haven’t, and no, one couldn’t just do it by themselves – for one the AESA radar is an American system and most of the weapon systems are American weapons. Even Russians don’t simply allow third parties to “upgrade” their fighter jets.

  21. @ kel

    What are you talking about? I have no idea of what your aerospace technical knowledge is but…

    Mtow is same (depends on which article you read, old or new)

    Internal fuel same (if extra 300gal then it is the humpback fuel tank, which is first fitted to the T-50A trainer)

    Nose radome same size

    Indonesian T-50i, Thailand T-50TH and Iraqi T-50IQ all have gatling guns.

  22. I guess it’s depend on which T50. Jet are built on trenches after all. Just like how trench 1 eurofigter couldn’t be upgraded.

    Thus the e OG ROKAF T50 might not be capable of conversion but newer one like the one TH & ID got is likely a ‘F50’ but being branded as a T50. If not mistaken ID T50 have a dummy in its radome to compensate for the weight of the radars.

    Thus it’s likely that TH, PH & ID can upgrade theirs, I don’t see why the US would block it but rather I would assume the US would actively ‘persuade’ those countries to do the upgrade.

  23. @Zaft
    “US would actively ‘persuade’ those countries to do the upgrade.”
    The US chooses who & when they can upgrade or not upgrade. They once embargoed TNIAF F16 from spareparts which led to them going Russian plane for a time.

  24. Those are TA50 not T50 despite the naming convention. The tell is in the takeoff weight and basic equipment. Another tell is the required light attack role which suggests avionics and equipment beyond the T50 advanced jet trainers – can look RoKAF own versions of the Golden Eagle. Indonesia and Thailand’s T50s did not come with the guns. They got upgraded later – another tell that the jets are cut based on the TA50 not T50. It is likely no one has ordered the T variant other than RoKAF. “Humpback” fuel tanks are conformal tanks used by newer versions of F16s and the Eurofighter. The TA50 and FA50 can use drop tanks to extend range. The biggest advantage of conformal tanks over drop tanks is hardpoint.

    Its not aviation knowledge, its what KAI says and what one would figure out when the informatin KAI publishes dont match the one’s being published by the users. I thought it was obvious from Indonesia and Iraq “T-50” specifications, those could not be the T-50 trainers. In case, can refer to KAI’s website.

    https://www.koreaaero.com/EN/Business/FA50.aspx

  25. Seems like poland having problem paying all those equiment that they buy from korean. Does that mean we can get FA50 earlier?

  26. Unlikely. Even if the Poles have problems paying, NATO/EU/USA will prolly give them some loans since Poland is just next door to Belarus/Russia so the Western powers have in their interest to strengthen Polish defences.

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