This article first appeared in The Edge Financial Daily on June 4, 2018

LANGKAWI: Malaysia has yet to consider striking a “compassionate deal” with Abu Dhabi-based International Petroleum Investment Co (IPIC) over the interest payments on the US$3.5 billion bonds it guaranteed for 1Malaysia Development Bhd (1MDB).

Prime Minister Tun Dr Mahathir Mohamad told reporters on Saturday that the government is still studying the implications of the terms of the loans and agreements.

“We have not come to that stage yet,” he said when asked if the government would consider striking a deal with IPIC to reduce the interest payments.

“We are studying the implications of the loans and agreements, and terms of the loans,” Dr Mahathir said after meeting with Langkawi-based Pakatan Harapan leaders.

In 2012, Goldman Sachs Group Inc arranged for the issuance of two 10-year bonds of US$1.75 billion each for 1MDB’s wholly-owned unit 1MDB Global Investments Ltd to buy two power plants.

The bonds, a US$1.75 billion bond with a fixed rate of 5.75% and a US$1.75 billion bond with a fixed rate of 5.99%, were co-guaranteed by 1MDB and IPIC’s subsidiary Aabar Investment PJS (Aabar). Both tranches are due in 2022.

Last year, 1MDB paid IPIC a total of US$1.205 billion as part of a settlement agreement reached at the London Court of International Arbitration after defaulting on interest payments, apart from a one-off US$200 million payment in 2016.

Last Wednesday, the ministry of finance (MoF) paid RM143.75 million in interest payment on the bonds, which was due, to IPIC. Finance Minister Lim Guan Eng has said another RM810.21 million worth of interest is due between September and November this year.

“The list of payments to date only involves interest, coupon payments and the advance from IPIC. 1MDB has yet to take into account the billions of ringgit of debt which will be due from the year 2022,” he added in a statement.

Guan Eng has said his officers are studying the debt and liabilities in detail and will propose measures to resolve the crisis created by the scandal.

To date, MoF has paid out RM6.98 billion to IPIC, RM5.05 billion of which relates to the settlement agreement fee.