This article first appeared in The Edge Financial Daily on November 5, 2019

KUALA LUMPUR: Former 1Malaysia Development Bhd (1MDB) chief executive officer Datuk Shahrol Azral Ibrahim Halmi yesterday revealed that most of the funds raised by the sovereign wealth fund intended to be utilised for the development of the Tun Razak Exchange (TRX) and Bandar Malaysia had instead gone to PetroSaudi International Ltd (PSI).

According to Shahrol, the plan was for 1MDB to raise RM5 billion and RM10 billion through bridging loan facilities for the TRX — at the time known as the Kuala Lumpur International Financial District (KLIFD) — and Bandar Malaysia, where the old Sungai Besi military airport was located, respectively.

The “hybrid programme” was to be executed in two phases — a bridging loan facility and a 25-year medium-term notes programme.

However, 1MDB only managed to raise some RM1 billion for the KLIFD project while the RM10 billion for the airport land redevelopment was never raised.

Even then, Shahrol revealed that only a “very tiny proportion” of the loan was used for the project, the majority of which was eventually channelled to PSI for additional charges from the Murabaha deal.

Recall that 1MDB previously decided to convert its US$1 billion of its shares in the joint venture with PSI into Murabaha notes, under the terms of a Murabaha Financing Agreement. This caused 1MDB to fork out another US$1.5 billion for the deal.

Tan Sri Muhammad Shafee Abdullah: Were the RM5 billion and RM10 billion in funds raised by 1MDB?

Shahrol: For the RM5 billion, yes. The RM10 billion, no.

Muhammad Shafee: To finance what?

Shahrol: To finance these two projects, Sungai Besi (airport land development) and the TRX.

Muhammad Shafee: Was the RM5 billion ever used for the project (TRX)?

Shahrol: Only a very tiny proportion was used for the TRX if I recall correctly, although I would have to look at the financial records

Mostly [the money went] to PSI for additional tranches for the Murabaha agreement we spoke earlier.

Muhammad Shafee: This is another familiar scenario, namely that the board was told the KLIFD project and Sungai Besi project would require RM5 billion and RM10 billion. You managed to raise RM5 billion first.

Shahrol: We eventually [only] borrowed RM500 million plus about RM700 million. I don’t think that comes up to RM5 billion.

Najib is facing four counts of abuse of power and 21 money- laundering charges in relation to 1MDB funds.