RAM votes to raise shareholder threshold, paving the way for CTOS takeover plan

RAM Holdings today passed a proposal that would allow the rating agency to come under the ownership of a single entity, after its annual general meeting (AGM) voted overwhelmingly in favour of a controversial amendment to its constitution.

Some 93.86% of the AGM members voted in favour of amending a clause in the company’s constitution to lift a ban on any single entity owning more than the current cap of 20% of shares in the rating agency.

MalaysiaNow has also learnt that at least two financial institutions, including a leading local bank, objected to the proposal.

The proposal to amend the clause was put forth by CTOS Digital, another credit reporting agency linked to Brahmal Vasudevan through his equity firm Creador.

The move, first reported by MalaysiaNow last week citing the notice of the AGM, is likely to ruffle feathers in the debt capital market, on the back of a plan by CTOS Digital to own a majority stake in the company.

CTOS has already received the green light for this from the Securities Commission Malaysia (SC). Amending the clause at the AGM today was seen as the last hurdle in its plan to take over RAM.

Among the concerns from the market is that RAM’s independence as a rating agency long used as a reference point for financial institutions in the country will come into question if it is controlled by a single entity.

RAM, in a response to MalaysiaNow’s report, had dismissed such fears, insisting that there were “safeguards” put in place by the SC.

“The SC would not grant approval to any party to exceed this limit if it deems this to be detrimental to the best interest of the credit rating agency and the bond market,” said RAM Holdings CEO Chris WK Lee.

RAM, established by Bank Negara Malaysia in 1990 to support the local debt capital market, is accepted as the industry leader in credit ratings by many fund managers. Its credit opinions are a crucial reference for banks as well as financial regulators.

Several fund managers and bankers had expressed alarm over the proposal to lift the shareholder limit, with one saying there had been a “gradual subversion of RAM” over the years, pointing to non-banking as well as foreign entities which make up about a dozen shareholders in the agency.

Adding to the fear is the potential conflict of interest by individuals in CTOS.

“We know for a fact that at least one CTOS non-executive director is sitting on the SC board of directors,” a capital market analyst told MalaysiaNow, adding that as RAM’s credit reports have implications in the bonds market, the latest development points to conflict of interest as well as “the death of integrity in Malaysia’s financial sector”.