Anwar's bailout raises concerns over corporate rescue precedents

Malaysia's Prime Minister Anwar Ibrahim is facing criticism after announcing a US$230 million rescue plan for Sapura Energy, a struggling oil and gas services company. This decision raises concerns about the government's commitment to economic reform, as many believe it contradicts Anwar's previous promise to avoid using public funds for company bailouts. Observers argue that the rescue is driven by political motives rather than sound economic reasons. Critics, including members of Anwar’s own political party, view it as a blatant bailout, despite Anwar's insistence that the move is a "strategic investment" aimed at supporting local contractors. He claims the intervention is essential to protect suppliers connected to Sapura Energy who are at risk of financial failure. The company has struggled financially for several years. Between 2020 and 2024, it reported losses of RM17.6 billion and has over RM18 billion in liabilities. Many financial experts are worried that this bailout might encourage other failing businesses to expect government assistance. Anwar's decision is particularly sensitive as it intersects with Malaysia's complex political landscape. Sapura Energy is partly owned by the state-owned Permodalan Nasional Berhad, which aims to support the economically dominant Malay community. Failure to assist Sapura Energy could give ammunition to opposition parties, while helping the company might be seen as catering to elite interests. To implement the rescue, Sapura Energy will issue convertible loan notes to the Ministry of Finance. This cash will be used to pay creditors and allow for debt restructuring, which aims to reduce Sapura’s debts significantly. Bankers involved in the rescue believe it is a last chance for the company to recover. Sapura Energy was once a top player in the global oil and gas services sector, but has faced challenges since a market crash in 2014. Its financial troubles led to increased state investment, which has not been enough to reverse its decline. The recent rescue may be a critical test for Anwar's leadership and his administration’s approach to economic management.