Urusharta Jamaah was the least disruptive option for Tabung Haji rescue, but risks remain

Wednesday 30 Sep 2026

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KUALA LUMPUR (July 29): The creation of Urusharta Jamaah Sdn Bhd (UJSB) was seen by the Royal Commission of Inquiry (RCI) as the least disruptive option to address Lembaga Tabung Haji’s (LTH) financial problems, but it also created long-term challenges in asset recovery and repayment.

The restructuring helped stabilise LTH by removing weaker assets from its balance sheet and restoring its ability to continue operations, including meeting its obligations to depositors. However, the RCI cautioned that UJSB did not eliminate the underlying problems. Instead, it shifted the risks from TH’s direct ownership of impaired assets to UJSB’s ability to recover value and repay its sukuk obligations.

The need for urgent action emerged after TH’s financial position deteriorated sharply by 2017, with losses rising to RM10 billion based on PricewaterhouseCoopers’s (PwC) findings. The weakening financial position threatened LTH’s ability to distribute hibah or dividend to more than 9.2 million depositors, raising concerns that a loss of confidence could trigger large-scale withdrawals and force asset sales under distressed conditions.

A special committee comprising representatives from the Prime Minister’s Office, Bank Negara Malaysia, the Ministry of Finance and LTH considered four options: a direct government injection, activating the government guarantee under Section 24 of Act 535, creating deferred assets, and transferring weaker assets into a special purpose vehicle.

The RCI found that a direct cash injection exceeding RM10 billion would place significant pressure on government finances, while activating the government guarantee would only provide temporary liquidity support without addressing LTH’s underlying asset quality problems.

The deferred asset approach was also rejected as it was inconsistent with MFRS 9 accounting requirements, which require losses to be recognised in the current financial year.

UJSB was therefore selected as the restructuring vehicle. The model allowed LTH to separate weaker investments from its balance sheet and focus on its core role of managing hajj operations.

Under the restructuring plan, UJSB acquired 106 listed equity holdings, TH Estate in Sri Aman, Sarawak, and 29 property assets. The assets were transferred at RM19.9 billion, despite having a market value of RM9.7 billion at the time, according to the RCI.

In return, Minister of Finance Inc-owned UJSB injected RM300 million cash and issued government-backed, zero-coupon sukuk — Series 1 worth RM10 billion at a 4.05% rate, which has been refinanced, and Series 2 worth RM9.6 billion at a 4.1% rate due May 2029.

The government approved the restructuring plan in December 2018, leaving LTH less than two weeks to complete implementation before year-end. The RCI said the urgency of the situation meant UJSB was essentially a damage-control measure rather than a complete solution.

Sukuk refinancing eases immediate pressure, but obligations remain

The RM27.5 billion sukuk obligation became the biggest long-term risk arising from the restructuring. However, part of the repayment pressure has since been addressed through refinancing of UJSB’s Series 1 Islamic paper.

The Series 1 sukuk, which matured in May, carried a nominal value of about RM12.5 billion at maturity. It was refinanced through the issuance of a new RM11.5 billion sukuk with a coupon rate of 3.825%.

The remaining RM965 million was settled through asset transfers, including a land parcel at Tun Razak Exchange (TRX) earmarked for future development and an estate in Sarawak.

While the refinancing reduced immediate redemption pressure, the broader challenge remains whether UJSB can generate sufficient returns to meet its future obligations.

Asset recovery remains the biggest challenge

The transfer of assets to UJSB did not guarantee value recovery. Several assets continued to face valuation pressure after the restructuring.

Property assets transferred at RM2.25 billion were valued at RM1.2 billion as at Dec 31, 2021, while several blue-chip holdings including Axiata Group Bhd (KL:AXIATA), Maxis Bhd (KL:MAXIS), MISC Bhd (KL:MISC), Digi.Com Bhd now known as CelcomDigi Bhd (KL:CDB) and Telekom Malaysia Bhd (KL:TM) remained below their transfer values.

The decline in asset values contributed to UJSB recording a RM9.9 billion loss in 2019, reflecting the gap between transfer values and prevailing market prices.

Despite the losses, the RCI noted that UJSB’s revised portfolio generated annual income of between RM200 million and RM300 million, allowing the company to cover operating costs without additional government working capital.

However, the commission highlighted another risk — LTH’s reliance on accrued sukuk income. Deferred income exceeded RM2.1 billion by the end of 2021, creating a potential mismatch between accounting profits and actual cash flows.

As at end-2024, UJSB recorded total assets of RM11.44 billion against total liabilities of RM23.86 billion, highlighting the continued imbalance between its asset base and obligations.

To strengthen the structure, the RCI recommended considering government-guaranteed sukuk, issuing sukuk in multiple tranches to spread repayment risks, introducing tradable features to improve LTH’s investment flexibility, and giving UJSB greater freedom to dispose of assets.

The commission also suggested that LTH reconsider its right of first refusal over transferred assets if they no longer offered competitive returns or required lengthy recovery periods.

Edited ByPresenna Nambiar

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