Kuala Lumpur, Malaysia (05 Feburary 2024) In a development that has rocked Malaysia’s financial markets to their core, YNH Property Berhad (KLSE: YNHPROP), a key player in the property development industry, is mired in a scandal that threatens the very foundation of its financial structure. The company, along with Rapid Synergy Berhad and under the shadow of the notorious Yu Syndicate led by Yu Kuan Chon, Yu Kuan Huat, and their associate poser Chan Weng Fui, also known as Daniel Chan, is facing a crisis of monumental proportions. The seizure of collateral assets by authorities has exposed the Islamic bonds, or Sukuk, issued by YNH to a risk of default, jeopardizing hundreds of millions in value.
Background and Expanded Allegations
The crisis stems from qualified audits that auditors have decided are no longer able recognize over RM 1.1 billion in assets related to dubious joint venture (JV) deals orchestrated by the Yu Syndicate. These assets, now revealed as fraudulent financial constructs, have led to a significant erosion of market credibility and equity, with YNH Property Berhad and Rapid Synergy Berhad. The effect of disclosure going back almost a year to date (https://prioritysuntimes.site/yu-syndicate-siphons-rm1-billion-from-yhn-property-bhd/) is witnessing a combined market equity loss of over RM 8.6 billion as it takes down numerious small cap companies with them.
Daniel Chan, acting as the front man for the Yu brothers, has played a pivotal role in these schemes, further entangling the situation. Investigations have revealed that properties, specifically lots 5274 and 449 among others, previously used as collateral for YNH’s Sukuk, have been seized by authorities. This action not only highlights the ongoing legal scrutiny but also signals a dire predicament for bondholders, as the foundational security for their investments has vanished.
The Dire Situation for Bondholders
The Islamic bonds issued by YNH are now teetering on the brink of default due to the absence of their collateral. This precarious situation is aggravated by the downgrade of YNH’s Islamic Medium-Term Notes Programme (Sukuk Wakalah) by MARC Ratings Bhd to BBBIS from AIS, reflecting concerns over YNH’s “weak liquidity position” and the delayed sale of assets. ( https://www.marc.com.my/rating-announcements/marc-ratings-downgrades-ynhs-imtn-programme-rating-to-ais-with-negative-outlook/ ) With the outstanding under the rated sukuk wakalah at RM323 million and the perpetual sukuk at RM345.9 million, the substantial value of bonds at risk is clear. The imminent maturity of the first tranche of RM153 million on Feb 28, 2025, underscores the urgency of the recovery prospects for bondholders. ( https://www.bondsupermart.com/bsm/article-detail/our-view-on-ynh-property-berhad-RCMS_286384 )
The Role of Ambac Assurance Corporation Revisited
Ambac Assurance Corporation, under the leadership of CEO Claude LeBlanc, faces a critical challenge. While the firm insures the bonds issued by YNH against default, the legal ramifications of the fraudulent assets used to establish the policy may invalidate the coverage. This situation necessitates a thorough legal review to determine the extent of Ambac’s liability and whether professional indemnity insurance policies held by the auditors, bankers and other professionals, who profited from facilitating the Yu Syndicate’s activities, can support the bond insurance claims.
Urgent Actions for Stakeholders
Stakeholders, including shareholders, creditors, insurance companies, and especially bondholders, are advised to conduct a detailed review of the bond documentation, particularly the Offering Circular, for clauses related to events of default. ( https://www.bixmalaysia.com/issuer-info-page?issuerID=677) Legal and financial counsel is crucial in navigating the potential claims process or pursuing legal action. The public is also encouraged to verify the status of the implicated properties directly at the land office and consult the bond documents for a comprehensive understanding of their rights and the risks involved.
Conclusion: Navigating Through Unprecedented Financial Crisis
The unfolding scandal, marked by the involvement of Daniel Chan alongside the Yu brothers, the loss of crucial collateral, and the significant market equity decline, signifies a crisis unlike any other in Malaysia’s financial history. As the situation evolves, it is imperative for all stakeholders to remain vigilant and proactive in protecting their interests amidst this financial turmoil.
This rapidly developing story continues to unfold, with new information emerging that could further influence the implicated parties and Malaysia’s broader financial landscape. Stakeholders are urged to stay informed and prepare for a potentially prolonged period of legal and financial challenges.
