Felda mum on Rajawali deal

Felda now wants to invoke a put option if Rajawali fails to secure RSPO certification by the end of 2019


The Federal Land Development Authority (Felda) was silent yesterday over news that it is seeking to end its controversial deal with Indonesia’s Rajawali Group and claim back US$500 million (RM2.04 billion) from the conglomerate controlled by Peter Sondakh.

A Felda spokesperson, when contacted, said the the agency’s investment team will respond to queries over a report by Singapore’s The Straits Times (TST).

“We have received a lot of enquiries about this. We have yet to receive any feedback from our investment team. We will update once there is information,” the spokesperson said.

The news report, citing Felda sources, said the federal agency was considering an exit from a deal to buy a 37% stake in Rajawali’s PT Eagle High Plantations that was made during the previous administration under Datuk Seri Mohd Najib Razak.

The deal was criticised when it was announced because of the high premium that Felda agreed on to buy the stake. The deal was paid via a US$551.85 million bond issue guaranteed by the government. The 37% stake is now valued at about US$125 million.

The TST report said Felda now wants to invoke a put option that is allowed if Rajawali fails to secure certification by the Roundtable of Sustainable Palm Oil (RSPO) before the end of 2019.

The put option allows Felda to sell back the Eagle High stake for US$505.4 million, plus an interest of 6%, to Rajawali.

The report said Felda board of directors told Rajawali about its intention to invoke the put option in a letter dated Jan 3, 2019, because the Indonesian planter showed little progress in obtaining the RSPO certification, which is crucial to access the world’s main palm oil market.

It is understood that Rajawali has stated its intention to challenge Felda’s put option in court.

If confirmed, Felda’s move to extricate itself from the controversial deal comes at a time when the agency is facing cashflow problems.

Economic Affairs Minister Datuk Seri Mohamed Azmin Ali has said that Felda’s “very critical” cashflow problem has forced the agency to restructure some RM8 billion of debt and find ways to dispose of some RM2.2 billion of assets.

Azmin said these strategies will enable Felda to stabilise its cashflow in the next two years, while realising its commitment to 112,635 settlers.

Azmin said Felda’s new management, which was appointed in July, has been discussing with several financial institutions to restructure the agency’s debt, which would result in savings of 15% to balance the debt of RM6.8 billion by year-end.

It is also exploring opportunities to dispose of non-strategic assets, namely properties in London, Sabah and Sarawak, which were purchased at a total cost of RM2.2 billion.

He said apart from the heavy debt burden, depressed crude palm oil prices is also a primary factor that affects Felda’s cashflow.

Details of the government’s plan to turn around the debt-riddled Felda is expected to be presented via a white paper in the next parliamentary session in March.