KUALA LUMPUR: Putrajaya must conduct a special audit of 1Malaysia Development Bhd’s (1MDB) finances after the strategic investor reportedly requested for a third extension to repay a local RM2 billion loan, throwing a spotlight on its finances, said a DAP lawmaker.
Petaling Jaya Utara MP Tony Pua said 1MDB was “holding Malaysian banks hostage by seeking a third extension for its overdue RM2 billion loan”, citing a Bloomberg report yesterday saying “1MDB is planning to seek another one-month extension” on its RM2 billion loan “to give it more time to sell a stake in its energy unit”.
“This news is shocking as 1MDB has already missed two repayment deadlines for a RM2 billion debt in November and December 2014. Even this RM2 billion loan itself is part of a rescheduled and restructured debt it couldn’t pay in November 2013,” he said in a media statement released in Kuala Lumpur yesterday.
He said the loan repayment extension raised a bigger question about the US$1.1 billion (RM3.97 billion) of funds which recently appointed 1MDB chief executive officer Arul Kanda Kandasamy had announced as “redeemed” from its Cayman Islands investment on Jan 13.
“Why couldn’t 1MDB have repaid the RM2 billion loan with the proceeds of the redemption first to ease the pressure on 1MDB?” he asked.
“The 1MDB debt crisis and its inability to resolve the meagre amount relative to its RM42 billion debt betrays the fact that the company is in serious financial trouble. Its assets are over-leveraged and illiquid while in all probability, 1MDB is also unable to exit its investments without incurring substantial losses,” he added.
Pua said that Prime Minister and Finance Minister Datuk Seri Najib Razak, who is the chairman of the board of advisers for 1MDB “can no longer hide behind the outlandish façade and rhetoric that 1MDB is financially strong when it has to reschedule its RM2 billion debt repayment thrice”.
“Instead, Datuk Seri Najib must instruct a special audit of 1MDB by the auditor-general or a reputable independent auditor to uncover its financial shenanigans,” the DAP lawmaker said.
He pointed out that The Edge Financial Daily had reported that Bank Negara Malaysia (BNM) had summoned key executives of 1MDB over the loan repayment and warned them of the consequences of failing to meet the loan repayment deadline this month.
“The act of even seeking another extension to the loan, which is only a fraction of 1MDB’s RM42 billion debt, is an affront to BNM. 1MDB is also holding its bankers, in this case Maybank (Malayan Banking Bhd)and RHB Bank [Bhd], hostage as the banks will have little choice but to grant 1MDB a further extension to the loan.
“It is completely unbecoming and irresponsible for 1MDB, a wholly-owned subsidiary of the Ministry of Finance to bully its financiers. At the same time, 1MDB’s delinquency threatens both the creditworthiness of the Malaysian government and the stability of the Malaysian banking system,” Pua said.
The Bloomberg report said the state-owned investment company needed more time to repay the debt as it’s still in discussions with billionaire T Ananda Krishnan, Malaysia’s second-richest person, citing people who asked not to be named as the process was private.
“[Ananda] Krishnan may exercise an option, granted when he sold energy assets to 1MDB in 2012, to buy part of the Edra Global Energy Bhd unit, the people said,” according to the report.
Pua said it was scandalous that the question of 1MDB’s ability to repay a RM2 billion debt now hinged entirely on whether Ananda decides to exercise his options to acquire a stake in a 1MDB subsidiary.
“Firstly, 1MDB had overpaid Ananda with a RM8.5 billion acquisition of his power assets in 2012. Now Ananda holds the trump card to potentially buy a strategic stake in 1MDB’s energy division at a fire-sale price because 1MDB has a RM2 billion sword hanging over its head.
“And the new chief executive officer, Arul Kanda, has the cheek to tell the media that 1MDB is a ‘responsible borrower’,” he added. — The Malaysian Insider
This article first appeared in The Edge Financial Daily, on January 29, 2015.