KUALA LUMPUR (Oct 12): The government is in negotiations to take over the entire stake in Boustead Naval Shipyard Sdn Bhd (BNS), which is in the midst of completing the long-delayed littoral combat ship (LCS) project for the Malaysian navy.

This is different from the initial plan for the Ministry of Finance’s (MOF) indirectly-owned special purpose vehicle (SPV) Ocean Sunshine Bhd to acquire only a 20.77% stake in financially-stressed BNS from Boustead Heavy Industries Corp Bhd (BHIC) for RM1.

The takeover is to “ensure the issue of trust deficit is addressed”, the Ministry of Defence (Mindef) had said in June, according to the Public Accounts Committee (PAC) report on the progress of the LCS project for the period of October 2022-May 2023.

As part of efforts to salvage the project and address BNS’ tight cash flow, nine banks involved in financing BNS agreed to restructure RM624 million worth of BNS’ debt, according to the PAC report.

Mindef proposed for the restructuring to be done after BNS is fully taken over by Ocean Sunshine, the report said.

The PAC report quoted Mindef’s deputy chief secretary (development) Datuk Shahrazat Ahmad as saying that the “MOF together with the nine banks have not started negotiations”.

“The plan is for the transfer (of BNS stake) to the SPV to be done first, then only negotiations, or the terms, or the restructuring, can be started extensively,” Shahrazat was quoted as saying.

BNS is a unit in the Boustead group. Its largest shareholder is Boustead Holdings Bhd holding a 68.85% stake, followed by BHIC (20.77%) and the Armed Forces Fund Board (LTAT) (10.38%).

LTAT is currently the sole shareholder of Boustead Holdings after the privatisation exercise early this year. Both Boustead Holdings and LTAT also own 65% and 8.16% stakes in BHIC respectively.

On Oct 11, Prime Minister Datuk Seri Anwar Ibrahim said in a parliamentary reply that Ocean Sunshine completed the acquisition of 10.38% BNS stake from LTAT.

“The balance 68.85% and 20.77% stake owned respectively by Boustead Holdings Bhd and Perstim Industries Sdn Bhd are now in negotiations to undergo a transfer of ownership, and is expected to be finalised latest by 4Q2023,” Anwar said.  

Perstim Industries is wholly-owned by BHIC.

Anwar [PH-Tambun] in his reply to questions by Member of Parliament Jamaludin Yahya [PN-Pasir Salak], did not elaborate on the price expected for Ocean Sunshine’s proposed takeover of the 89.62% stake in BNS.

BNS has been in the spotlight for years of delays and cost overruns in the proposed development of six LCS for the navy. This was despite the company having spent RM6 billion for the project. The initial deadline was for the first vessel to be delivered by 2019.

After the government stepped in, the project was downsized to building five LCS instead of six, with the costs expected to escalate to RM11.22 billion from RM9.128 billion originally planned.

The five LCS are expected to be delivered in Aug 2026, April 2027, Dec 2027, Aug 2028 and April 2029, the report added.

BNS was supposed to deliver the first ship in April 2019 and the sixth combat ship this year, according to the timeline under the original contract that was awarded in 2013.