KUALA LUMPUR (May 15): Did 1Malaysia Development Berhad (1MDB) president Arul Kanda Kandasamy approve a US$975 million (RM3.6 billion) loan given to the state investment vehicle while he was working with one of the six lending banks, a DAP lawmaker asked today.
Quoting a report by The Edge Financial Daily, Petaling Jaya Utara MP Tony Pua said Arul Kanda was working in the Abu Dhabi Commercial Bank (ADCB), one of six banks which gave out the loan to 1MDB, when the loan was granted in September last year.
Arul was appointed 1MDB president in January this year.
"After it was exposed by Singapore's Business Times two days ago that the Deutsche Bank-led banking consortium will be recalling their US$975 million loan to 1MDB, it was discovered that ADCB was one of the consortium lenders," Pua said in a statement today.
"Arul Kanda would have no choice but to respond to the above claims to explain his degree of involvement in 1MDB’s fund-raising exercises prior to joining the company.
"His silence on the matter will only strengthen the speculation that his interest may be conflicted and 1MDB may have been compromised instead.”
The Business Times reported two days ago that six "jittery lenders" have turned "panicky" because their loan was secured by 1MDB's wholly owned Brazen Sky's US$1.103 billion, which is currently said to be parked at Swiss-based BSI Bank Singapore.
The business daily, quoting sources, said "securitisation document" for the loan was now deemed "incomplete", as one of the covenants was not fulfilled.
This means lenders can demand for repayment from the state investment vehicle any time before its due date of end-August.
However, 1MDB has refused to comment on the loan and instead said that it was bound by a "confidential banking matter", with Arul Kanda telling The Malaysian Insider that more information would be provided when they were able to do so.
"We are aware of recent press reports and statements concerning a loan taken by 1MDB in September 2014. While we would like to respond in detail, this relates to a confidential banking matter, which prevents us from commenting at the present time. However, we intend to update the market as soon as we are in a position to do so," he said.
The Edge had reported two months ago that the loan was used to buy back options granted to ADCB's sister company, Aabar Investments Limited, to acquire 1MDB’s power assets.
These options, the report had said, were initially granted to Aabar as part of the terms for Aabar’s parent, International Petroleum Investment Corporation (IPIC), to provide a guarantee for two 1MDB bond issues amounting to US$3.5 billion (RM12.6 billion).
"This begs the question whether Arul was involved in putting together the loan to 1MDB and whether he was involved in the dealings of IPIC and Aabar when he was working in Abu Dhabi," Pua said.
"Given the fact that ADCB, IPIC and Aabar are all owned by the Abu Dhabi government, it makes Arul’s role as 1MDB president even more delicate and subject to scrutiny of possible conflict of interest."
Pua, who is DAP national publicity secretary, said Arul Kanda must also reveal how much of the RM3.6 billion loan was used to buy back the option given to Aabar.
"The only amount cited in the March 2014 financial statements is US$250 million which was raised via a bridging loan facility in May 2014. However, the amount was not finalised.
"Therefore, the question is whether the US$975 million was also used to pay Aabar for the options. If it is indeed so, 1MDB would have paid an astronomical US$1.23 billion to the Abu Dhabi companies in order to secure a guarantee from IPIC for the US$3.5 billion loan.”
If this was true, Pua said it would not have been an exaggeration that 1MDB had secured a guarantee from an international "loan shark".
Unanswered issues like this have tainted the government's image, Pua said, adding that he agreed with with Umno's Kepala Batas MP Reezal Merican Naina Merican who has slammed 1MDB for keeping silent over the allegations.
On April 22, whistle-blower Sarawak Report said 1MDB’s account in BSI Bank merely contained “paper assets”, the “true value of which cannot be determined”. – The Malaysian Insider