TAX-PAYERS’ MONEY TO BAILOUT MAS?

PKR Supreme Council member cum PKR Sabah Secretary  Dr Roland Chia Ming Shen questioned the move by the Board of Directors of  the civil service pension fund (KWAP) in taking up the entire first tranch of RM1 billion of the MAS airlines’ perpetual sukuk today. KWAP money is pensioners money which also broadly translates to tax payers money.

This is likened to the controversial way that the Government has resorted to using Employees Provident Fund (EPF) savings to fund loans for the purchase of public housing projects in Federal Territories way back in Feb 2012.

To add woes to this – such perpetual bonds does not carry a government guarantee. Perpetual bonds, also known as perps, are also considered higher risk bonds as there is no guarantee of repayment. Perps are uncommon in Malaysia and mostly issued by banks.MAS is also the world’s first corporation to issue an Islamic perpetual bond.

Despite the perpetual sukuk to pay a rate of 6.9%, such bonds is also is endangered of not being rated. Why are the Board of Directors of KWAP allowing Pensioners Hard earned investment / savings to be invested in a company that has not profitability track record over the years?

With regards to perpetual bonds, neighboring regional monetary authorities  has already expressed concerns for eg Monetary Authority of Singapore had express concern over the demand for the higher risk fixed income instruments.

The Thai SEC (Securities and Exchange Commission) also issued a warning earlier this month for investors to fully understand the details of subordinated debentures, which is corporate debt that ranks as a low priority for repayment.

As far as PKR is concern, the move by KWAP is political motivated with a motive of another bailout, that will end up causing massive loss to the hard earned pensioners money. With rising costs of living and also rising household debt up to 76%, such move will only cause more hardship to our pensioners in the near future.

It is the gross mismanagement of Malaysian Airlines System that the authorities must look into and not using pensioners money for another bailout. This is evident by the recent announcement by MAS of a historic loss of RM2.52 Billion for the financial year end  2011.  This GLC company is now in crisis.

To add salt into injury, our neighbor national airlines Singapore Airlines managed to report a profit for a similar year 2011 of more than RM300 Million despite profit down by 53%. PKR Sabah Secretary, Dr Roland Chia disclosed.