This article first appeared in The Edge Malaysia Weekly on October 14, 2019 - October 20, 2019

AMBANK was again in the spotlight last week when the lead defence counsel for former prime minister Datuk Seri Najib Razak suggested “someone” in the bank had assisted businessman Low Taek Jho to rip off 1Malaysia Development Bhd and taxpayers in 2009 when the bank helped him flip debt papers acquired at a steep discount, benefiting Low and his associates to the tune of RM494 million.

Raising the issuance of the RM5 billion Islamic medium-term notes (IMTNs) in May 2009 by Terengganu Investment Authority (TIA) — the precursor of 1MDB — Tan Sri Muhammad Shafee Abdullah alluded to AmBank’s assistance in executing the transactions without the knowledge of TIA.

Former 1MDB CEO Datuk Shahrol Azral Ibrahim Halmi — the prosecution’s ninth witness — told the High Court that the lead arranger of the issuance, AmInvestment Bank, had proposed that the bonds be sold at a steep discount to ensure full subscription as investor sentiment was weak because of the global financial crisis.

Minutes of 1MDB meetings also showed that the IMTNs were restructured “to make them attractive” on the advice of the then official advisers of TIA, namely Low and Datuk Abdul Aziz Mohd Akhir.

However, two offshore companies linked to Low — Aktis Capital Singapore Pte Ltd and Thailand-based Country Group Securities PCL — became the major secondary subscribers for the ITMNs, acquiring them at a significant discount of about 13% — extremely unusual for a conventional bond issuance, especially since it was government-guaranteed and carried a generous 5.75% coupon rate.

This fact was hidden from TIA, according to Shahrol, who claimed ignorance of the secondary subscription of Aktis Capital and Country Group — a company now known to be linked to Low’s father, Tan Sri Larry Low Hock Peng. Both father and son are now in hiding, and in July, the government seized RM48.9 million worth of assets from Larry under a civil forfeiture suit as neither he nor his representatives showed up in court to stake a claim on the assets.

On the very same day the ITMNs were issued, they were immediately resold at face value by the bank, as placement agent, to the Employees Provident Fund, Social Security Organisation and other unnamed insurance companies.

For some reason, these local institutions had not been offered the opportunity to purchase the discounted notes.

The High Court was also told that AmBank had inked secondary subscription agreements with Aktis Capital and Country Group on May 15, 2009, days before the primary subscription agreement was signed between AmBank and TIA.

The Edge previously reported, quoting sources, that AmBank only made about RM70,000 in underwriting fees. However, it is not known whether the bank or “someone” from the bank also benefited financially in helping Low flip the bonds.

Shahrol said that initially, TIA had proposed to issue the RM5 billion notes for the purpose of developing a project on Pulau Bidong, Terengganu, in a joint venture with Mubadala Real Estate. However, the project never took off and the bond money was later used for a joint venture with PetroSaudi International Ltd.

Hearing before High Court judge Collin Lawrence Sequerah continues on Monday.

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