Friday 29 Mar 2024
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This article first appeared in The Edge Malaysia Weekly on August 10, 2020 - August 16, 2020

EVEN as 1Malaysia Development Bhd (1MDB) was engulfed in a mountain of debt of some RM10 billion, the strategic investment company was pushed to raise another US$3 billion as Malaysia attempted to interest Abu Dhabi in the development of the Tun Razak Exchange — an initiative that fizzled out quickly despite the signing of a joint-venture (JV) agreement by General Sheikh Mohammed Zayed Al Nahyan, the crown prince of the emirate.

In fact, so great was the focus on his visit to Kuala Lumpur in March 2013 that little oversight or due diligence went into the fundraising process or guarantees for the loan, or even the Abu Dhabi partner, the court heard last week at the 1MDB trial of former prime minister Datuk Seri Najib Razak.

No board meetings were held to discuss the fundraising, and it was eventually pushed through by businessman Low Taek Jho who was working closely with 1MDB’s advisers, Goldman Sachs, claimed former 1MDB CEO Datuk Shahrol Azral Ibrahim Halmi.

The TRX deal

Shahrol said that much of 2012 was spent trying to come to an agreement as 1MDB’s Abu Dhabi partner, Aabar Investment PJS Ltd (Aabar BVI), was insistent on owning the bulk of the land rights to TRX, which was initially called the Kuala Lumpur International Financial District (KLIFD).

“They proposed that once they build, they are to own the legal rights to the land where the development sits on. We pushed back on this. This was one of the deal-breakers. This took till the end of the year and that’s where it (negotiations) broke off,” Shahrol said.

Eventually, both parties agreed in 2013 to a 50:50 partnership.

A 1MDB directors’ circular resolution (DCR) dated July 9, 2012, and signed by Najib proposed that 1MDB Real Estate Sdn Bhd would develop a 564,965 sq m freehold land in KLIFD with Aabar BVI. On the same date, an approval for the joint development with Aabar BVI was given by the authorities.

Shahrol said that procuring a loan for the deal would have been difficult but he was assured by Jho Low that with the backing of Najib, who was then prime minister and finance minister, 1MDB’s only unsecured loan — supported by a letter of comfort from its shareholder, Minister of Finance Inc — would be “bulldozed” through.

With the help of Goldman Sachs, 1MDB issued bonds to raise US$3 billion, even though its Arab partner did not put in a cent. In actual fact, Aabar BVI was a company incorporated by Jho Low — now a fugitive — and his associates in the British Virgin Islands (BVI).

Although passed off as a subsidiary of International Petroleum International Company (IPIC), Aabar BVI was not a unit of IPIC and only bore a similar name to the genuine Aabar Investments PJS.

The JV between 1MDB and a special purpose vehicle set up by both companies called Abu Dhabi Malaysia Investment Company Ltd (ADMIC) was announced as the “first major multinational anchor investor” in TRX with an initial funding of US$6 billion.

Shahrol said that at that point, it was of utmost priority that the deal be expedited as the JV was to be signed in March 2013.

He added that his priorities were solely focused on the organisation and logistics of Mohammed Zayed Al Nahyan’s visit and that they had no choice but to go through with the deal even though as late as February 2013, the Aabar side had not provided any valuation report for the JV.

Moreover, the JV was set up solely via DCRs and shareholder resolutions — drafted, Shahrol claimed, by Jho Low — and Najib being the sole shareholder of 1MDB had also signed off on the resolutions.

Shahrol claimed that he was “left out of the loop” in the JV as Jho Low, 1MDB’s legal counsel Jasmine Loo and Mohd Hazem Abdul Rahman — Shahrol’s designated successor at 1MDB — “managed everything”.

“This deal was done very fast and I was left out of most of the [time] as I was solely focused on managing the crown prince’s trip.”

Two days after the crown prince’s visit, Shahrol was asked to step down as CEO and transferred to the Performance Management and Delivery Unit (Pemandu) under the Prime Minister’s Office — a transfer, Shahrol claimed in his written testimony, which was effected because he had asked too many questions on all the deals that had been rushed through.

However, he was asked to remain in the 1MDB board of directors by Jho Low to “manage optics”.

According to news reports, TRX had not seen much of the US$3 billion raised, and TRX City — the property arm of 1MDB — had to sell parcels of land within the 70-acre development to finance infrastructure costs amounting to RM3 billion, which had been promised by Aabar BVI and 1MDB.

This is reflected in the National Audit Department report on 1MDB dated May 15, 2018, which said that TRX City sold five parcels of land for RM1.36 billion, and that RM1.1 billion from the land sales had been “advanced” to 1MDB.

 

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