KUALA LUMPUR (Sept 18): Malaysia Building Society Bhd (MBSB) has proposed to undertake a members’ scheme of arrangement which entails the disposal of its non-financial subsidiaries and non-performing conventional loans.

In a filing, MBSB said five of its companies in the property development business will be transferred to a corporate share trustee, while disposal of the loans — carrying a book value of RM279 million — shall be settled in cash and on a deferred basis.

The five companies had combined negative net liabilities of RM1.105 billion as at end-2022, the filing showed.

The scheme, MBSB said, will allow it to be a pure investment holding company with no loans and no direct interest in companies which are not involved in financial services.

The decision follows a scheme of arrangement entered by MBSB back in 2018, in relation with its acquisition of Asian Finance Bank (now MBSB Bank Bhd) completed that year.

Under the scheme, MBSB had obtained a vesting order to identify residual conventional financial assets and liabilities (which cannot be converted to Shariah-compliant assets and liabilities) and non-financial subsidiaries, and dispose of them to third parties.

A July 2021 deadline for the vesting order had previously been extended to April 2024.

In its filing, MBSB said it will transfer its shareholding in its wholly-owned special-purpose vehicle (SPV) Emerald Unity Sdn Bhd into a corporate share trustee.

Emerald Unity is an SPV incorporated to hold the residual assets and liabilities upon the implementation of the proposed scheme, MBSB said.

After the transfer, MBSB will dispose of its five subsidiaries to Emerald Unity, namely MBSB Development Sdn Bhd, Prudent Legacy Sdn Bhd (in liquidation), MBSB Properties Sdn Bhd, 88 Legacy Sdn Bhd, and Definite Pure Sdn Bhd for RM2 each.

While Emerald Unity will be the legal and beneficial owner of the assets, MBSB said the assets will continue to be recognised in its books.

“MBSB is regarded as still retaining substantially all the risks and rewards of the assets’ ownership,” it said.

The proposed scheme requires approval of at least 75% in total value of shareholders of the company, present and voting at the court-convened-meeting for the proposed scheme, among others.

MBSB is in the midst of acquiring Malaysian Industrial Development Finance (MIDF) from Permodalan Nasional Bhd (PNB) via a RM1.01 billion share deal, which will see the birth of a merged entity with over RM60 billion in assets.

The deal, which will see PNB owning 12.78% of MBSB, was expected to be completed in 3Q2023.

Shares of MBSB settled unchanged at 73 sen, giving the bank a market capitalisation of RM5.24 billion.