KUALA LUMPUR (Nov 3): Prime Minister Datuk Seri Najib Razak has reiterated that an agreement signed between 1Malaysia Development Bhd (1MDB), Abu Dhabi’s International Petroleum Investment Company (IPIC) and the Minister of Finance Inc (MoF Inc) on May 28 this year, will reduce the troubled strategic development company's debt by about RM16 billion.

He said the agreement is a binding term sheet, where the three  signatories will abide by the terms and conditions of the business agreement.

Najib, who is chairman of the board of advisers of 1MDB, said this in a written reply dated yesterday to a parliamentary question by Petaling Jaya Utara Member of Parliament Tony Pua.  

Pua had asked whether MoF Inc would be liable to pay IPIC, if 1MDB were to fail to transfer assets totaling US$1 billion to the Abu Dhabi fund by June 30, 2016.

However, this was not answered by Najib.

Under the deal, 1MDB and MoF Inc had agreed to perform the obligations contemplated in the binding term sheet and to indemnify IPIC and its subsidiary Aabar Investments for any non-performance.

Recall that IPIC had on June 4 this year provided US$1 billion to 1MDB for the latter to immediately settle its loan, amounting to US$975 million. From June 5, IPIC had assumed 1MDB’s obligations to pay on an interim basis all interest due under the notes amounting to US$3.5 billion in aggregate principal amount.

IPIC will directly assume liability for all payment obligations under the notes (the assumption of debt) and forgive certain financial obligations of the 1MDB group to the IPIC group (debt forgiveness).

By June 30, 2016, IPIC is to have received a transfer of assets with an aggregate value of an amount, which represents the sum of the cash payment, the assumption of debt and the debt forgiveness.