Malaysia company IWH suspends trading in listed arm after 1MDB deal aborted

Screengrab from Iskandar Waterfront website.
Screengrab from Iskandar Waterfront website.PHOTO: ISKANDAR WATERFRONT HOLDINGS

KUALA LUMPUR - Malaysia's Iskandar Waterfront Holdings (IWH) has suspended trading of its public-listed arm as it seeks to challenge the cancellation of its purchase of a stake in Bandar Malaysia, the country's biggest real estate project which is to house a Kuala Lumpur-Singapore High-Speed Rail (HSR) terminus.

Stocks for Iskandar Waterfront City (IWC) were suspended on Thursday, but had stumbled before closing on Wednesday ahead of the announcement by a fully-owned subsidiary of the Ministry of Finance, TRX City.

The aborted RM7.41 billion (S$2.39 billion) deal has a direct link to the plan by debt-laden state fund 1Malaysia Development Bhd (1MDB) to retire its debts, as its subsidiary, TRX City, owned the Bandar Malaysia development.

TRX City has since been spun off to the Ministry of Finance (MOF). 

The unit announced on Wednesday that a deal for IWH and its China consortium partner to own and develop Malaysia's largest property project had lapsed. 

 
 

The upcoming township at the edge of Kuala Lumpur has an estimated sales value of RM150 billion.

Before the trading suspension, IWC saw its shares skyrocket 282.61 per cent on a year-to-date basis, mostly due IWH's announcement that it would merge with IWC, a move that would include its Bandar Malaysia stake under the listing as well.  

IWH and China Railway Engineering Corp (CREC) had agreed in December 2015 to pay RM7.41 billion for a 60 per cent stake in Bandar Malaysia. The remaining 40 per cent was to be held by the MOF unit.

However, in a late announcement on Wednesday, TRX City said the deal to jointly develop one of the city's last huge prime lands had lapsed, citing failure to meet payment obligations.
 
The project site in Sungai Besi, where an old military airport sits, is 196.7ha in size, nearly five times the size of the Kuala Lumpur City Centre project.

TRX City said it is now looking for another master developer but that it will retain 100 per cent ownership of the development.

The Wall Street Journal reported that the deal lapsed because the Chinese government refused to grant CREC permission to proceed with the investment. 

The IWH CREC consortium said on Wednesday evening that it was concerned with the content of termination notice and press release issued by TRX City.
 
It also added that the announcement by TRX City "does not fully and accurately reflect the circumstances and conduct of the parties in this matter" and is reviewing the contents with its legal counsel.

In March, IWH sought a merger with IWC. IWH, controlled by tycoon Lim Kang Hoo, already has a 38 per cent stake in IWC. 

Another property firm controlled by Lim, Ekovest, saw its shares drop sharply in Thursday morning trading.

Opposition lawmaker Tony Pua said the collapse of the deal would strain the MOF as it has to bear the burden of servicing payments to relocate the air force and service a RM2.4 billion sukuk (Islamic loan) 1MDB initially took to service the project.