They said other troubled companies may now seek government help to ease their financial burden, though few would have an affiliate with strong cashflow like Renong's toll-road unit, Projek Lebuhraya Utara-Selatan Bhd (PLUS).

"This is good for other companies as they can now say they should also be helped," said a local fund manager. "But PLUS is the cash cow for Renong which the rest do not have."

Under the plan structured by investment bank Credit Suisse First Boston, the government would issue 10.5 billion ringgit worth of bonds that Renong and affiliate United Engineers (Malaysia) Bhd would use to cut their debt."This is a bail-out, and it is being seen as negative for the (stock) market. It stinks of cronyism," said a dealer at a local bank-backed brokerage.

"They are basically sacrificing(associate) United Engineers to save Renong," the dealer said.

Analysts described parts of the deal as a creative method of cutting the debt of the politically well-connected group.

"It's very creative, obviously. They are using PLUS cash flow to pay up some loans," said PB Worldsec Securities analysts, Ravind Thanabalasingham.

Malaysia's opposition leader Lim Kit Siang said the Renong bail-out could be a forerunner to similar rescue plans for other firms with strong political links.

He said Malaysians were entitled to know why Renong chalked up such colossal debts that now required a government bail-out.

In recent months, the government had stepped in to rescue state-owned Bank Bumiputra Malaysia Bhd and shipping group Konsortium Perkapalan Bhd controlled by Mirzan Mahathir, eldest son of prime minister Mahathir Mohamad.

Renong denied the deal was a bail-out, saying no government resources would be used. Instead, Renong said it was helping to rescue some government projects.

The whole planrests on the group's ability to get approval from the government and creditors. Renong said the government had approved the plan in Principle, but not its 70 creditors.

To allay suspicions that Renong was helped because of its political connections, the government might intervene in other deals, analysts said."To be fair, the government may have to help other companies with no (political) links, so as not to give opportunity to foreign critics," said Ang Kok Heng, general manager at TA Asset Management.

Renong was the main investment vehicle of Mahathir's United Malays National Organisation party until it was sold off several years ago.

It is controlled by tycoon Halim Saad, a protege of Mahathir's close adviser Daim Zainuddin, the minister charged with rejuvenating the economy.

The Asian economic crisis, which brought high interest rates, sagging demand and a depreciated ringgit currency, has hit a number of prominent Malaysian firms.