KUALA LUMPUR (May 3): The Employees Provident Fund (EPF) said there has been no decision yet on the retirement fund's investment in 1Malaysia Development Bhd (1MDB)'s RM5 billion sukuk issuance, as the trustees have not deemed there was a cross default on the issuance — so far.
"So far, we have not been given any notice by the trustee on the RM5 billion issuance, as to whether or not they will be calling bondholders on the issue," said EPF chief executive officer Datuk Shahril Ridza Ridzuan, when asked if there has been a cross default on 1MDB's sukuk issuance.
"We'll just have to wait and see if the trustees deem there's a cross default and whether they have to bring the matter to bondholders. At this point, there's nothing so far," he said at the launching of the EPF's 2015 annual report today.
He said the fund does not have significant exposure in the issuance, at RM200 million out of the total RM5 billion.
"Our exposure to 1MDB is very limited. We have RM200 million out of the first RM5 billion issuance, when they were still known as the Terengganu Investment Authority (TIA).
"That exposure is fully government-guaranteed. We don't have a problem with it. We've never had an issue in terms of the servicing of payments by 1MDB," he said.
He added that the retirement fund is following the current developments surrounding 1MDB, saying there was "quite clearly a cause of concern" due to the ongoing dispute between 1MDB and Abu Dhabi's sovereign wealth fund IPIC, which stands for the International Petroleum Investment Company.
1MDB had withheld a US$50 million interest payment on US$1.75 billion of dollar notes last month, amid a dispute with IPIC, which is the co-guarantor of the bonds maturing in 2022, triggering a cross-default on its RM5 billion sukuk due 2039, and a RM2.4 billion Bandar Malaysia sukuk due between 2021 and 2024.
Last week, IPIC said it would pay the interest payment to holders of the notes, but would reclaim the sum from Malaysia's Ministry of Finance.
"In any event that 1MDB defaults, the government will step in to cover the debt to all bondholders," said Shahril.