Thursday 28 Mar 2024
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KUALA LUMPUR (May 29): What is 1Malaysia Development Bhd (1MDB) giving in return for the US$1 billion payment from Abu Dhabi-based International Petroleum Investment Co and its subsidiary Aabar Investments PJS so that 1MDB can settle its US$975 million syndicated loan?

That is the question posed by opposition lawmaker Tony Pua, who is also DAP national publicity secretary, in a statement this evening.

He also lambasted the Ministry of Finance (MoF) for being “pleased to announce” that its wholly-owned subsidiary 1MDB had managed to secure the US$1 billion from the investment arm of a foreign country to repay its own debts.

Pua was referring to an earlier statement today by Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah, which said 1MDB “has entered into a binding agreement with IPIC and its subsidiary Aabar Investments, where IPIC will make a payment of US$1 billion, on or before June 4, 2015”.

The US$1 billion payment will in turn be used by 1MDB to repay a US$975 million (RM3.5 billion) syndicated loan from a consortium of international bank lenders led by Deutsche Bank AG, in advance of its due date.

The payment is part of a larger agreement 1MDB has entered with IPIC and Aabar, that Ahmad Husni said will "include further measures to comprehensively address the various financial asset and liability transactions between the parties, further details of which will be announced in due course".

What IPIC’s US$1 billion was in consideration for was, however, not disclosed.

“The US$1 billion payment would not have come for free, and would have had plenty of conditions attached to it. What are these conditions? Did 1MDB sacrifice even more of Malaysians’ future tax-payers’ funds to secure this desperate loan?” Pua asked.

He added that this would not be the first time IPIC comes to the “rescue” of 1MDB. 

“When 1MDB needed to raise funds in 2012 to acquire the independent power producers (IPPs), Tanjong Power and Genting Sanyen, 1MDB had to ask IPIC to provide a guarantee in order to raise the funds via two bond issues, each worth US$1.75 billion. The guarantee was necessary despite the fact that 1MDB priced the bonds very attractively at 5.99% coupon rate,” said Pua.

Pua said the guarantee was no “friendly gesture” on the part of IPIC, but instead came at an exorbitant price to 1MDB, which “contributed in no small way to the massive annual interest bill and cashflow crunch for 1MDB”. 

“Firstly, 1MDB had to dock approximately 40% of the loan with IPIC as security deposit. This amounted to RM4.47 billion (US$1.4 billion) as disclosed in the March 2014 financial statements. Effectively, this means that 1MDB is pay 5.99% interest on a US$3.5 billion loan despite having access to only 60% of the funds or US$2.1 billion.

“Secondly, 1MDB had to offer the option for Aabar to acquire up to 49% equity interest in Powertek Investment Holdings (PIH) and 1MDB Energy (Langat), which are the holding companies for the acquired IPPs in order to secure the guarantee,” said Pua.

Based on its full year March 31, 2014 financial statements, 1MDB disclosed that its subsidiary 1MDB Energy Holdings Ltd had taken a bridging loan facility of US$250 million in May 2014 to buy back these options granted to Aabar, called ‘the Aabar options’. 

“This represents a compensation to Aabar although the final settlement consideration isn’t yet known. In fact, it has been speculated that the options compensation might be as high as an incredulous US$1 billion, based on analysis by The Edge weekly,” Pua noted.

Effectively, this US$250 million (or more) represents a fee paid to IPIC to secure its corporate guarantee for 1MDB subsidiaries to raise US$3.5 billion, which is at least 7.1% of the funds raised, claimed Pua.

“Today we hear the second finance minister proudly announcing that IPIC is extending another US$1 billion to assist 1MDB to repay part of its mountain of debt. He must immediately provide full disclosure on what this US$1 billion “assistance” is going to cost 1MDB, the Malaysian government and the long-suffering tax-payers,” Pua demanded.
 

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