When A Concession Agreement Is Not So 'Agreed'

The Introduction

I am a student researching different companies for my Management and Entrepreneurship* course at a local university, and for the past year I have been observing several companies come in and out of PN17 status. Sometimes I think to myself if these companies deserve it or not, or whether being in PN17 status is justified (*ahem* Serba Dinamik *ahem*) but at the end of the day most companies are built from the ground and the challenge lies in maintaining its success and keeping shareholders happy.

In my class, other students highlighted ‘fun-sounding’ companies such as Caely Holdings Berhad, Pharmaniaga, Reach Energy, Berjaya Corporation, etc. While they have their own company whose values deemed interesting to them, I found myself drawn to researching something different.

As of late, I noticed a certain company’s name pops up on the news every so often over the same thing. To me, this usually happens for a salacious case like when our former Prime Minister (malu apa bosskuuuu) was convicted, or major news like Sam Ke Ting or some celebrity’s divorce case (too many to count especially this year).

This company to me is Bintai Kinden Corporation Berhad. As I was waiting for the longest traffic light in the world cruising by the historical scenic view of Venice in Malaysia, I passed by a controversial university that has been tied up with Bintai Kinden. I did a quick Google search and this is what I found out:

UNIMEL (Universiti Melaka) came about when Optimal Property Management Sdn Bhd (a wholly-owned subsidiary under Bintai Kinden (OPM)) was awarded a concession agreement valued at RM121.0 million for three years of construction and 22 years to maintain the student accommodation.

Of such, OPM took out a 17-year tenure Islamic financing facility agreement (read: loan) from MBSB Bank Berhad to part-finance the UNIMEL campus. As part of the agreement, Kolej Teknologi Islam Melaka Berhad (KTIMB), the operator of UNIMEL and Melaka Chief Incorporated (CMI Melaka) would pay OPM for the maintenance services and ‘top-up’ the remaining amount.

However, CMI Melaka and KTIMB have not been paying their dues.

In 2020, OPM had no choice but to file a Statement of Claim to the High Court of Melaka for an amount in access of RM15 million. From March 2021 until December 2022, Bintai Kinden paid MBSB RM18.6 million while only receiving RM3.7 million from KTIMB. OPM has only received a payment of RM150,000 on 21 December 2022. KTIMB has informed OPM that there is no payment for January and February 2023, and resumed payment in March 2023 of only RM150,000. By right, there needs to be RM3 million collected annually or RM150,000 monthly.

As of today, the outstanding principal payable to MBSB is RM105,557,756.27. That's a lot of money!

The Executive Director of Bintai Kinden, Azri Azerai, said that CMI Melaka has not topped up the ACR shortfall as agreed, and as such, OPM has had to fork out its own funds to repay the financing facility, but they continued anyway for the sake of the students.

From what I can see, Bintai Kinden has a track record of delivering all of their jobs on time, and has been awarded a number of jobs, most recently by TNB, which includes RM14.2 million to install transformer bays in Pasir Besar, Negeri Sembilan.

Until today, KTIMB and OPM has not come to an amicable solution, Bintai Kinden will be going for a full trial with KTIMB in July 2023.

Because of this, in March 2023, Bintai Kinden falls into PN17 status after MBSB Bank Berhad issued a notice of termination dated March 29, 2023, to Bintai Kinden as the corporate guarantor and its wholly-owned subsidiary OPM as the borrower of the RM109.0 million.

Bintai Kinden is working on the regularisation plan and will be submitting it to the SC and Bursa Securities within three months of the announcement of the PN17 classification for the plan to then be announced on the stock exchange. Bintai Kinden will also be announcing the details of a regularisation plan as a ‘requisite announcement’ with the details and sufficient information by their Principal Adviser.

To sum up, Bintai Kinden has been putting in the work, the money and fell into PN17 status as they were cornered to by CMI and KTIMB. Wouldn’t you say it is unfair for them to be cornered into providing and maintaining the UNIMEL accommodation for the sake of the students, and have to fork out money from their own pocket to do so, even though they have a signed agreement with CMI?

Who is in the wrong here?