This article first appeared in The Edge Malaysia Weekly on May 29, 2023 - June 4, 2023

ACE Holdings Bhd has been in the news a lot lately mainly because of legal suits initiated against it by individuals and entities that had placed money with the company, in return for preference shares in it with targeted annual returns of 12% on average.

To put things into perspective, ACE Holdings’ unit — ACE Credit (M) Sdn Bhd,  which is a licensed moneylender — utilised investor funds to further its business.

However, with the Covid-19 pandemic and government moratorium on loan repayments, collection became an issue for ACE Credit and it now owes ACE Holdings RM747.47 million. Meanwhile, ACE Holdings’ total payment obligation to its preference shares subscribers stands at some RM818.62 million.

Will ACE Holdings be able to get out of this mess?

In an interview with The Edge, its executive director, Datuk Calvin Choong Chee Meng, explains (somewhat guardedly) what transpired at the group in the last year. His cautious stance is understandable, considering the many legal suits that have been filed against both ACE Holdings and ACE Credit, and the overall secrecy that surrounds a moneylender and its clients.

Here are excerpts from the sit-down interview at ACE Holdings’ office.
 

The Edge: How do you feel about the persecution you are facing now?
Choong: [I feel] it’s not fair to us. Previously, everybody was enjoying what we declared, [but it was] not promised. But we have met our targeted returns [for so many years and there were] no complaints. When this happened for just one year, and people start to complain, it’s like false accusation. So, we feel that it’s not fair. We have already explained [our difficult position] and the majority of them (investors) support us.

There are a lot of suits right now, but you say that the majority still support you.
Yes, these are just a few [instances]. People are not satisfied, but when they were getting the returns, they didn’t care what you did, they just enjoyed [the payout].

Your licence is for moneylending?
Yes.

Was there any engagement between these groups (investors) and ACE Holdings before they went to court?
Yes, we did engage, we explained to them. We [explained we] want to restructure, rebuild. That’s what we are doing.

Do you see yourself coming out of this problem?
I’m confident. 

How do you hope to do that? What’s the structure you’re going to come up with?
I can’t say much, the restructuring plan [is] actually not a standard run-of-the-mill restructuring or reorganisation plan.

How much have you raised over the years? In one of your prospectuses, Datuk, we saw that you were looking to raise RM1 billion.
It’s about that amount. 

Are you in trouble because the moneylending business went bad?
Because of the moratoriums, we were unable to do our collections. The moratoriums were only lifted around October 2022.

But weren’t the moratoriums only for banks?
They [included] those with moneylending licence as well.

When you sold ACE Holdings’ stake in Apex Equity Holdings Bhd, did you sell it at a loss?
Yes, I had to sell because the Securities Commission [required us to sell]. [We sold at a] loss of over RM100 million.

What really happened at Apex Equity? How did you manage to buy the equity in the company? The SC said ACE Holdings was not ‘fit and proper’ to hold the stake. So, shouldn’t you have got the approvals before making such a large acquisition?
Normally, [when it’s a substantial stake] you need [the] approval [of the regulator], but the approval must be sought by the vendor. The vendor, who was an individual (the late Chan Guan Seng, Apex Equity’s substantial shareholder and executive chairman), was supposed to do [obtain] the approval part but didn’t (as he passed away in early 2018).
ACE Holdings then appealed to the SC. He (Chan) was supposed to do it, but he didn’t do it …  SC said no ...  pare down to 14.9%. [We had] no choice, and then after that, so many things happened, that was the starting point.

What is the SC’s issue with ACE Holdings?
Actually, there is no issue. To be frank, we don’t have any problems with the SC.

So your relationship with them (the SC) is good?
Yes.

Does ACE Holdings still have a stake in Apex Equity?
No.

Can you tell us who you sold the stake to?
No. We don’t know. It was sold on the open market.

So, you are totally out of Apex Equity?
Yes, totally out of Apex Equity.

When you bought into Apex Equity, what was your intention?
Investment.

How is your relationship with Apex Equity now?
There is no relationship. 

So, it (the acquisition into Apex Equity) was in line with your moneylending business?
Because we have moneylending, we have investments …  so we have to invest, just like a fund, we have to invest to generate profit … In the first place, the 12%-15% that ACE Holdings has been paying is actually a target, it is not a promise …  It is not a promise, (but) The Edge writes there is a promise, I feel that is not fair to us.

We follow whatever is in the court documents.
It’s a target. All the while we were able [to deliver], but now with this Covid crisis …

For how many years were you able to maintain it?
Ten years. Because this pandemic happened, an economic crisis.

So, you were able to give more than 10% returns in the past?
Previously, before the pandemic, we always met our target.

And these returns were generated from investing activities?
Yes, correct.

You (ACE Holdings) had a stake in Apex Equity. Are there any other listed companies that you have shares in?
Previously, we had [invested in] about six to seven [public-listed companies], we normally lend to corporate players, and we take shares as collateral.

Any names that you can tell us?
I cannot disclose …  we lend money, invest money.

We saw in court documents that there is a new shareholder coming into ACE Holdings, injecting RM2.5 billion. Is it a financial institution?
I cannot tell you so much.

Will there be a dilution of your shareholding and that of your other shareholders?
I would say a dilution in terms of equity because it’s going to be the issuance of new shares …  Basically, it’s a share subscription.

Will the new shareholder participate in management?
Yes.

How will the breakdown be between the existing and new shareholders?
It’s preference shares, not ordinary shares, then these are RPS (redeemable preference shares), they are not redeemable convertible preference shares or RCPS.

The business must be lucrative in order for someone to inject RM2.5 billion into it.
We have future plans. The new partner is coming in because we have discussed our business plans moving forward. All parties are comfortable with this new business plan and find it profitable.

What are the future plans?
I can’t share.

But moneylending will still be your core business?
Yes.

What is the interest rate you charge on average?
Twelve to 18 per cent, this is what we call compound rate. Effectively, it’s higher than 12% to 18%.

If you have sold out of PLCs, what else are you investing in?
Now we don’t invest because of the crisis.

How much do you have in the moneylending market? When you raised RM1 billion, how much of it went into the market?
I can’t remember the number.

But most of it went into the moneylending market? 
Mostly.

The new business is more than moneylending?
Beyond that.

But you will still have management control of the company?
Yes, of course, they are sending their board representatives inside also.

Do you think collection is getting better now?
Hopefully (yes).

What sectors do most of your loans go to?
Quite a number of sectors.

And because of the lockdown the borrowers could not pay?
Yes, because this crisis is worse than all the previous financial crises.

Tell us about the hearing of the judicial management application.
We had several parties to intervene ... We saw three of the applications have bigger interest. So we considered the three, of course, Koperasi Permodalan Felda (KPF) wanted to intervene, but we opposed it, because they are not even creditors.

How does that work, saying they are not creditors? They gave you RM40 million.
ACE Holdings is a separate legal entity. ACE Credit is 100%-owned by ACE Holdings. Even though it’s 100% shareholding, it’s a separate legal entity. (KPF’s case is against ACE Credit.)

How long is the court process?
On June 13, the court will decide whether KPF can intervene. The court is requesting me to file my written submissions. And there are also several other interveners that are filing applications to intervene. The court will give directions.
Under the law, when judicial management is filed, automatically you cannot commence any action or continue any action against the company without the leave of the court.

It’s protection for ACE?
Yes.

So, ACE gave loans to corporations because these corporations couldn’t get loans outside …
If you go to the banks, banks are very conservative, banks take a lot of time.

How did the trouble start? When you couldn’t collect?
Yes.

Was the shortfall very big, the amount that you needed to collect during Covid-19?
Yes, because there is no profit.

So you couldn’t pay (the returns to investors)?
Yes.

What are ACE Holdings’ main assets?
This building (ACE Tower, in KL Eco City, Jalan Bangsar).

How big is your loan book?
I have to check.

You are doing bridging loans then, mostly for corporations?
Yes, but we don’t do HP (hire purchase).
 

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