Comfortably Numb

A close up of Maharaja Lela at the BNS yard in Lumut taken in 2018.

SHAH ALAM: Comfortably Numb. The government, according to Defence Minister DS Ismail Sabri, decided to allow the resumption of the Littoral Combat Ship (LCS) project to protect the interest of the workers and companies and also the RMN.

He said the continuation of the construction of the ships would save 1,600 workers comprising local people from losing their jobs and more than 400 vendors comprising Bumiputera SMEs. “If the construction of this LCS is not continued, it will have a negative impact on the workers and the Bumiputera vendors involved.

The hull of the third LCS and the keel of the fourth LCS as seen from another angle in 2018.

Despite what he said it is distressing to see that Boustead is trying to get the courts to ensure that the debts it have with its vendors – some of it Bumiputera companies – be settled in a way that will suited it the most.

Although the hull of the second LCS looks complete, she is still missing a lot of her superstructure. Picture taken in 2018.

From The Edge:

A subsidiary of listed company Boustead Holdings Bhd, namely Boustead Naval Shipyard Sdn Bhd (BNS), will know on June 2 whether the High Court here will grant leave for a restraining order against its creditors and allow the firm to enter into a scheme of arrangement for more than RM1 billion of its debts.

High Court Judicial Commissioner Liza Chan Sow Keng fixed the date after hearing submissions on the issue from legal representatives of Boustead and the 15 financial institutions or creditors on Wednesday evening. BNS was represented by Lee Shih and Nathalie Ker of Lim Chee Wee Partnership.

Some of the companies involved in trying to fight the order are:

Since then, it is understood that other creditors have intervened in the ongoing court proceedings over the scheme of arrangement. Besides MTU Services, others include Contraves Sdn Bhd, Axima Concept SA, Contraves Advanced Devices Sdn Bhd, Contraves Electrodynamics Sdn Bhd and Tyco Fire, Security & Services Malaysia Sdn Bhd, as well as iXblue SAS, iXblue Sdn Bhd and Protank Mission Systems Sdn Bhd.

Also included are Bank Pembangunan Malaysia Bhd, AmBank Islamic Bhd, AmBank (M) Bhd, MTU Services, Affin Hwang Investment Bank Bhd, Bank Muamalat Malaysia Bhd, Affin Bank Bhd, Bank Kerjasama Rakyat Malaysia Bhd, Malayan Banking Bhd (Maybank) and Kuwait Finance House (Malaysia) Bhd.

It is interesting to note that Contraves Advanced Sdn Bhd are among the companies that are also trying to prevent this from happening. The company is partly owned by Boustead itself. Representatives of some of these companies have also met with Ismail this week likely asking him to intervene on their behalf.

A close up of Maharaja Lela at the BNS yard in Lumut taken in 2018.

I am not a lawyer and even my Google research on the order being sought by Boustead does not convey a full understanding of the matter. But I believed – I could be wrong of course – Boustead is seeking to ensure that it does not need to pay all of the outstanding debts with its creditors at one go but instead wanted a schedule much more beneficial to itself. And it is likely payments will be much lower than the amount billed.

The rear end of Maharaja Lela sticks out from the shipbuilding hangar as seen from the Pangkor ferry in 2018.

How it this going to help its creditors – mostly companies involved as subcontractors, and their workers then? And by burning bridges with its local sub-contractors it may well indicate that BNS be given permission to finish only two ships then.

— Malaysian Defence

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16 Comments

  1. Marhalim,

    I suppose there’s a court process going through, based on your article above? Are you allowed to observe the process, or is it restricted ?

    Reply
    Its not restricted but I don’t have the time to go for it, if I even found out the time and exact date of the proceedings. Usually this kind of things are also done via the filing of documents only and not open hearing like criminal ones. That’s why you seldom see this kind of things reported in local newspapers.

  2. It is quite normal for a company being sued to bankruptcy to seek for debt restructuring, tho its usually between both parties. The reason why BNS is going to court cuz the creditors had issued a legal demand for debt payment and threatening bankruptcy. Normally the outcome would be some settlement either on the total sum claimed, the timeline for repayment, or a combination. Worse case scenario it turn into bad debts if BNS cannot pay & really do go under.

    The sad thing is, the main reasons for reviving this project isn’t for TLDM needs firstly but it is to ‘save’ local companies and local jobs.

  3. Isnt 6 bill already paid supossedly being used to buy all equipment needed to complete 6 ships? Or that was just a farce from BNS to suck govt money to pay off their credit?

  4. Not the first time. During Naval Dockyards time the company I was working for was ask to take a substantial haircut if we want our money immediately. If we dont accrpt thete will be no payments n even if thete is payment it will be draged on for 7 to 8 uears. A bird in hand is better than two in the bush. So balls kena squeezed. My boss accepted.
    But this time thete are both Financial n commercial creditors. Banks can be squeezed to accept. But commercial creditors would be more troublesome.
    So can Boustead get its way?. Too many creditors object.n the rescue scheme does not go ahead. Surely the court will be faie to creditors too.
    Thats why chop Boustead off n allow a new jount vemture between designer n newco to complete the ship

  5. Sad to see uncompleted mega project….like i said in past post…it will be completed when all of its electronics…cms…weapons are about to be obsolete…thats the way it is…and upgrades projects will follow there after…the vicious circle will keep its rotation no matter what….the best next things to do is buy Turkey..,pakistan…iran…UAE…or eastern block countries…Serb..estonia…ukarine…

  6. @RedSot
    There are some silver lining to the delays as we could uparmed the ships with latest VL Mica NG that doubles the range now. otherwise, most of the equipment and armament are state-of-the-art and bear in mind mil tech have longer shelf life compared to smartphone generations.

  7. Not sure what is the stage of legal actions. However , there are two types of actions which creditors can take.
    First stage is legal notice of demand. For a corporation after the Notice of Demand is served, expired n company cant settle, immediate winding up can be taken. This action is very fast n tremendous pressure.
    The other way is notice of demand, serve satement of claims , replies etc n go for either summary judgment or full trial
    Thereafter Judgment is granted to either plaintiff or defendant.
    If judgment is pro plaintiff, the plaintiff can proceed with execution

  8. @Joe..That maybe the case but what we are arguing here is the fact that (most probably) BNS will only allowed to finish only 2 ships with 6bill already paid to them with the possibility for a 3 bill more just to finish that said ships..Imagine spending 9 billion just for 2 ships..4.5billion pership..Push them to finish that ship,sue the hell out of them and bury them for good..

    Reply
    How to sue the hell out of them, BNS is a state owned company.

  9. Hurray…the LCS vertical launch can be upgraded to mica NG…but alas at what cost…the launcher need to be replaced…the hardware n software need to be upgraded n sync with the CMS..intergration cost…all in all the boat will never touch sea since we are always spoilt for choices n the court case will be infinite….so by the time TLDM get its boat will be…?

    Reply
    The Mica NG can use the MICA VL launchers. You can read it in the earlier post on the MICA NG

  10. @joe

    that make no sense , since VL MICA NG are stated to use the same dedicated vertical launcher canister as the previous version of missile and backward compatible .

  11. Firdaus – ”Or that was just a farce”

    Even if it was a ‘farce” which it isn’t; you seriously think the RMN would have gone along with it? The intention from Day One was to have them fully fitted out and the budget was catered for this fact.

    Even completed late; most of the major components will not be obsolete [i.e. SMART, Captas and the main guns] these were designed to be ”relevant” for at least 20 years with software and other upgrades and will still be in production for the foreseeable future – it’s also not as if entry into service of these ships are delayed by a decade.

    The question really is what next after the LCSs have entered service? With a very fluid geo strategic threat environment; will ships of this displacement and fit out suffice and will the RMN in the coming years be able to supplement its manned assets with highly essential UASs, UUVs and USVs; all operating as part of a fully networked environment. Not to mention the next LMS design [fully fitted out] and the fact that a number of things currently operated will time expire soon.

  12. Being a successor to MICA; MICA NG is intended to be operated with no major new equipment or any integration required by existing users of MICA. As such; given that MICA has already been fully developed integrated with sub components of the LCS; MICA can be operated with little or no hassle.

    There is no way that MBDA would come up with an improved version of MICA that requires existing MICA users to acquire major nee equipment or to perform integration. The question really is whether the timeline will allow us to get MICA NG for the lead ship; given that MICA NG is still at least 3-4 years (?) away from being ready.

  13. @FIRDAUS
    IIRC BNS did mention somehwere they needed another RM 6Bil (ontop of the 6Bil spent) to complete all 6 ships. Total would be RM 12Bil if not mistaken. Either way the project was underbudgeted to begin with so a supplementary budget to complete them is inevitable. Suing BNS won’t help, just left pocket goes to right pocket of Govt, it’s a GLC after all. Even if BNS gets wound down, another GLC will be used to ‘save’ it so how is that any beneficial? What would benefit is to complete all the 6 ships at an agreeable final cost, and then have PAC investigate the cause of this SNAFU.

    @Hamid
    I think you’re referring to the wrong person as VL Mica NG is drop in replacement for ori VL Mica. So with the delays, we could get that newer missile instead.

  14. VL Mica NG launch customer is Egyptian Navy for their Gowinds which all 4 ships are likely going to be fully operational before even KD Maharajalela will be, so the question if timing would be right is moot.

  15. @RedSot
    “the best next things to do is buy Turkey..,pakistan…iran…UAE…or eastern block countries…Serb..estonia…ukarine…”

    I dont think so. Regardless who we will buy from, the mistakes that we do with LCS (and even the Kedah) must not repeat. IMO;

    -The design of the ships (including weapons and subsystems) should be choose by TLDM (according to the budget allocated of course), not by local contractors such as BNS as with the case of LCS

    – All the LCS/frigates should not be build locally even if wanted to locally build just 1 or 2 ships

    – No need for expensive ToT

    – We can focus on locally building small boats and OPVs, but not high end corvettes/LCS/frigates/submarines etc.

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