KUALA LUMPUR: Just over a week after claiming that the money 1Malaysia Development Bhd (1MDB) used to settle its RM2 billion loan to local financial institutions came from its own Cayman Island funds, the government is now saying the money was from a loan arranged by Tanjong plc — which is controlled by tycoon T Ananda Krishnan — with some “private investors”.

Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah, however, stressed that the money was not from Tanjong or the tycoon, popularly referred to as AK.

He said Tanjong undertook to arrange the loan for 1MDB with the private investors as the fund had bought over Powertek Energy Sdn Bhd (previously Tanjong Energy Holdings Sdn Bhd) from Tanjong.

“This (loan) was arranged by Tanjong because 1MDB bought over Powertek Energy from Tanjong, so Tanjong arranged for private investors to fund RM2 billion, to be paid [to 1MDB] in five months, [and for 1MDB] to pay interest in six months, the principal in 15 months, without exchange risk; which means the lender will have to bear the difference from the ups or downs of the exchange rate,” he told Parliament during the wrap-up debate on the royal address.

He was responding to questions by Bayan Baru Member of Parliament (MP) Sim Tze Tzin about the source of 1MDB’s funds to settle its RM2 billion debt.

When Sim pointed out that AK owns Tanjong, Ahmad Husni replied: “No, Yang Berhormat doesn’t understand. I said arranged. The RM2 billion is from private investors, not from Tanjong.”

Ahmad Husni’s remarks contradict his ministry’s written reply on March 14 on the same issue when queried by Batu MP Tian Chua.

The ministry said then that 1MDB’s RM2 billion debt was settled in early February with money from its own Cayman Island funds and not with the billionaire’s help.

The ministry’s written reply said 1MDB had withdrawn its US$2.318 billion offshore savings in the Cayman Islands in two tranches, and that the first tranche of US$1.215 billion had been used to pay back “loan interest, working capital and other scheduled commitments”.

The second tranche of US$1.103 billion is still held in foreign currency at BSI Bank Ltd Singapore. The ministry said this second tranche would be used to repay loans in foreign currency that are due this year.

It had also said the decision to keep the funds in the Singapore bank was “to facilitate easier withdrawals” as Bank Negara Malaysia regulations state that “its approval is needed for every transaction exceeding RM50 million”. 

It had also dismissed reports that alleged the money to settle the debt was borrowed from AK as “not true”. 

On Feb 13, The Malaysian Insider reported that the fund had settled the loan with funds from AK, six days before bankers were to trigger a default.

It said the fund’s debt, which was guaranteed by the tycoon’s company Usaha Tegas Sdn Bhd, was settled on Feb 12 with intervention from AK.

The primary lenders of the debt were Malayan Banking Bhd and RHB Capital Bhd. The other lenders were Alliance Investment Bank Bhd, Malaysia Building Society Bhd and Hwang DBS Investment Bhd.

This article first appeared in The Edge Financial Daily, on March 26, 2015.