NFCorp clarifies use of loan

My comment : Folks, you may be wondering why all of a sudden I am posting these news releases by the NFC folks. Everyone has a stake in this NFC issue and not just NFC itself. Public funds (our money) was used.

The time has really come when all this type of wheeling and dealing has to stop. This business nexus (usually running into the milions and billions) between the Goverment, the Cabinet Ministers, their families or their near and dear ones really has to stop. We must put an end to this. It is ethically and morally not right. The Malaysian people will not tolerate this type of illicit relationships anymore.

However the Opposition has also been taking advantage of the situation and blowing things up to suit their own purposes. They have been highlighting what they say are detailed aspects of this NFC case - as though they have direct access to the Board of the NFC. Much of their hype over the details is just that - hot air.

The following clarifications (which have been sent to almost the entire media and the Bloggers) by the NFC seek to explain some of these "technical details" which have been hyped up by the Opposition. I am merely posting their clarifications without any further comment.

Suffice to say they are putting things in black and white. If they are telling the truth, well and good. If they are bending, hiding, being selective etc with the truth, then be informed that this is in the public record.

SAA

news release

FOR IMMEDIATE PUBLICATION

SUNDAY 26 FEBRUARY 2012

NFCorp clarifies use of loan

MP Tony Pua Misleading Public

KUALA LUMPUR --- National Feedlot Corporation Sdn Bhd (NFCorp) responded today to say the opposition MP for Petaling Jaya Tony Pua’s statement that NFCorp had violated conditions of the loan agreement was clearly meant to mislead the public when providing the media with only a selective set of the facts.

His accusations, NFCorp said, did not reflect the full details and true picture on the use of the loan approved by the government for the National Feedlot Centre (NFC) programme.

In a statement to clarify, NFCorp said the loan agreement had to be read concurrently with the implementation agreement, the powers of the company as set out in its memorandum and articles of association and other related documents.

In law, the articles of association represent the understanding between the shareholders of the company on their relationship with each other and the powers of the company as a legal entity on how it would actually conduct its business under the law and in accordance to the Companies Act 1965.

Under the Third Schedule in NFCorp’s memorandum and articles of association, Article 19 (K) entitles NFCorp, “to invest and deal with the money of the company not immediately required in such manner as may from time to time be thought fit.”

NFCorp said that it was important that the loan agreement be read together with the implementation agreement and the company’s memorandum and articles of association for a holistic understanding of MoF’s terms and conditions for the loan.

Also in the same Third Schedule in NFCorp’s memorandum and articles of association, Article 19 (L) states, “To lend and advance money or give credit to any person or company; to guarantee and give guarantees or indemnities for the payment of money or the performance of contracts or obligations by any person or company; to secure or undertake in any way the repayment of moneys lent or advanced to or the liabilities incurred by any person or company; and otherwise to assist any person or company.”

In addition, Article 19 (M) states, “To borrow or raise or secure the payment of money in such manner as the company may think fit and to secure the same or the repayment or performance of any debt, liability, contract, guarantee or other engagement incurred or to be entered into by the company in any way and in particular by the issue of debentures perpetual or otherwise, charged upon all or any of the company’s property (both present and future), including its uncalled capital; and to purchase, redeem, or pay off any such securities.”

NFCorp said the fact that the government subscribed to a preference share in NFCorp would have meant that the authorities had taken cognizance of the powers of the company, among others to extend inter company loans, as provided in NFCorp’s memorandum and articles of association.

The loan agreement signed on 6 December 2007 also provided for the following important clauses which were not highlighted by MP Tony Pua –

12.1 - In the event that the Loan Facility is utilized to fully pay for the purchase of landed properties, the Borrower hereby agrees that it shall create the necessary charge/assignment over such landed properties in favour of the Lender.

12.2 - In the event the Loan Facility is utilized partially to pay for the purchase of landed properties, the Borrower hereby agrees that it shall create the necessary charge/assignment over such landed properties in favour of the

Lender in proportion to the amount of the Loan Facility used for the purchase of the said landed properties, subject to obtaining of agreement by other financiers or parties who contribute to the purchase of the said landed properties. It is hereby understood by the parties that such proportion of the Loan Facility shall rank pari passu with other financing or loans secured for the purpose of purchasing the said landed properties.

In the course of the project implementation, the government had in April 2009 put on hold the building of an Export Quality Abattoir that was to be completed and rented to NFCorp. This was to facilitate a feasibility study of the viability of the feedlot project by an independent consultant appointed by the government.

As such, the effective date on the loan repayment has been renegotiated with the government due to the deferred construction of the Export Quality Abattoir that has yet to be built by the government. The request is for the repayment to only start after the completion of the delayed Export Quality Abattoir.

Had an Export Quality Abattoir capable of 350 heads of cattle a day been built by the government in 2008 and leased to NFCorp as agreed in the implementation agreement, the possibility of the beef production numbers would have been achieved. The contract farmers under the Entrepreneur Development Programme and NFCorp targets would be able to see 246,000 heads of cattle bred by 2015 and deliver 44,000 metric tonnes of beef.

According to NFCorp, it was during this temporary deferment that monies were invested with the objective of ensuring that the company is able to meet its loan repayments. Rather than just placing the monies in money market instruments, it was deemed more prudent a business decision to invest in properties in the short-term. The intention to invest in properties was to hedge the funds in order to protect its value. Clearly this was not a dissipation of funds.

In the event that the Government resumes the NFC programme to construct the Export Quality Abattoir, NFCorp would dispose off its other short-term investments in properties, and the funds and profits will be readily available for the company’s operations.

The property market said NFCorp, is sound and secure, more protected, and less volatile than others, and the investments could be liquidated when the company needs it for the implementation of the bio gas plant, feedlot phase 2 and 3, palm kernel crushing plant and the feedmill.

Just prior to the NFC programme being suspended, NFCorp had taken it sixth draw down amounting to RM64.723 million as per schedule. However, in the following month, the government announced that the Export Quality Abattoir was deferred until a full viability study was done. This made a stringent call for the company to decide what to do with the drawn down funds.

NFCorp said that amounts drawn-down from the special loan account are irrevocable which meant it could not be returned. In addition, the interest rate cost for the funds transferred to the special loan account becomes chargeable regardless of how much of the RM250 million had been specifically drawn down for the various stages of the project.

Therefore, the investment decision was well within the powers of the company as set up in its memorandum and articles of association that provides for NFCorp, “to invest and deal with the money of the company not immediately required in such manner as may from time to time be thought fit.”

NEWS RELEASE prepared and issued on behalf of National Feedlot Corporation Sdn Bhd (NFCorp) by public relations consulting firms - GRA Communications Sdn Bhd and Prestige Communications Sdn Bhd. FOR MORE INFORMATION, please contact GHAZALIE ABDULLAH at            +6017 3361090       or ghazalie@gra-pr.com OR HAMIDAH KARIM at            +6012 2672397       or hkarim@i-prestige.com.