1MDB converts RM2b advance into Powertek shares

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KUALA LUMPUR: 1Malaysia Development Bhd (1MDB) is converting the RM2 billion advance that it has granted its subsidiary Powertek Investments Holdings Sdn Bhd into equity interest in the latter.

Subsequently, Powertek’s parent Edra Global Energy Bhd, which intends to float its shares on Bursa Malaysia, will resubmit its documentation previously submitted to the Securities Commission Malaysia (SC) in relation to the proposed listing.

Powertek is an operating subsidiary of Edra.

In a statement yesterday, 1MDB president and group executive director Arul Kanda Kandasamy said the conversion of the debt into equity interest in Powertek is among “certain material developments that have occurred in relation to Edra (formerly known as 1MDB Energy Group Bhd)”.

The statement noted that Edra has notified the SC of its intention to revise, update and resubmit the documentation.

The conversion of the advance owed to 1MDB into equity interest would in turn expand Powertek’s share capital. Consequently, this would help to safeguard 1MDB’s majority holder position in Powertek should there be any capital injection by a third party.

Coincidentally, in January, 1MDB needed to pay RM2 billion to local banks, including Malayan Banking Bhd and RHB Bank Bhd, for debt settlement and the payment deadline had been extended several times.

Businessman T Ananda Krishnan has been said to have lent a helping hand to 1MDB on settling the outstanding RM2 billion.

However, Ananda’s assistance to 1MDB could pose a problem as the amount he injected into Powertek would make him the single-largest controlling shareholder of the subsidiary based on its current valuation — a scenario that would breach the bond convenant. 1MDB has to hold a controlling stake in Powertek under the bond agreement.

 

This article first appeared in The Edge Financial Daily, on March 5, 2015.