Friday 29 Mar 2024
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KUALA LUMPUR: 1Malaysia Development Bhd (1MDB) has come out to say that its debt totalling RM37 billion at the financial year ended March 31, 2013, does not pose any significant risk to the sovereign rating and stability of Malaysia.

“As a limited liability company, 1MDB poses limited liability risks to the government as its shareholder.

“The government guarantees RM5.8 billion of the group’s total loan on which 1MDB has significant interest cover. 1MDB has never missed any payment schedule,” said the state-owned firm in a statement yesterday.

It was responding to an article by Reuters on Monday which said 1MDB’s debt is a risk to Malaysia’s solid investment-grade sovereign rating.

1MDB also said all of its debts are backed by the group’s operational assets, with “healthy cash flows and strong growth potential beyond their finite life”.

“The group’s cash assets, meanwhile, are currently being invested in both the energy and real estate sectors for investment returns. This will in turn be used to cover debt and to return cash to shareholders,” it added.

1MDB said there is sufficient asset cover by 1MDB’s group assets, adding that the group’s total assets stood at RM46 billion as at March 31, 2013, compared with its total debt of RM37 billion.

It also noted that its recent restructuring exercise has enabled 1MDB to reduce its RM6.17 billion bridging loan to RM5.5 billion through internal funds.

The bridging loan was taken up two years ago to finance the acquisitions of Powertek Energy Sdn Bhd from Tanjong Plc.

Now in its fifth year of operations, 1MDB, chaired by Prime Minister Datuk Seri Najib Razak, expressed optimism that it expects to see strong contributions from both its energy and real estate arms, which are expected to yield investment returns higher than their cost of capital.

Under its energy stable, 1MDB owns 16 power and desalination plants in six countries. The group has a net power generation capacity of 5570MW, making it the second largest IPP in the country.

“With the addition of Jimah Energy Ventures, 1MDB expects the revenue from its energy arm to further contribute to the company’s bottom line,” it said.

1MDB is also the master developer for the upcoming international financial district, Tun Razak Exchange (TRX), and the 500-acre (202ha) urban redevelopment project Bandar Malaysia, both of which are in the prime area of the capital city, it added.

1MDB said 1MDB Real Estate is in talks with several targeted investors for joint venture opportunities and outright plot sales for Stage 1 of TRX, noting that investment deals are expected to be announced in the near future.


This article first appeared in The Edge Financial Daily, on June 4, 2014.

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