1MDB says IPIC deal will reduce its debt levels by RM16b

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KUALA LUMPUR (Oct 9): Troubled state investment firm 1Malaysia Development Bhd (1MDB) said its debt for asset swap with International Petroleum Investment Co (IPIC) will reduce its debt levels by up to RM16 billion upon completion.

The transaction will see IPIC assume obligation for a US$3.5 billion bond principal and interest, currently held by 1MDB, and follows a US$1 billion cash payment made by IPIC to 1MDB in June 2015.

In a statement today, 1MDB said IPIC's assumption of these obligations will be satisfied through an exchange of assets, provided by 1MDB, partly the company's US dollar denominated cash deposits and partly its US dollar funds under management — either in cash or in fund units — upon mutual agreement with IPIC.

The transaction is part of 1MDB's rationalisation plan, as presented to the Cabinet on May 29 this year, to reduce its debt to a sustainable and manageable level by the fourth quarter of 2015.

Recall that in August, The Business Times Singapore had reported, citing an unnamed source, that IPIC is considering pulling out of the plan to help 1MDB restructure its debts.

On this, 1MDB made reference to a statement by IPIC on Oct 8 confirming that progress continues to be made with respect to a binding term-sheet signed between the two companies.

"IPIC's statement, confirming its commitment to working with 1MDB and its 100% shareholder Ministry of Finance, conclusively puts to rest false claims and allegations concerning the relationship between the two companies that had previously been published by the Business Times and subsequently repeated, without proof, by [Democratic Action Party lawmaker] Tony Pua.

"1MDB trusts that with this conclusive evidence, all third parties with no involvement in the ongoing 1MDB rationalisation plan will now cease making unfounded allegations with respect to its implementation," said the firm.