Bank Negara queries bank auditors on unpaid 1MDB loan

By admin-s On Feb 6, 2015

(TMI) – The lenders are expected to revert on whether to officially declare it a default by February 18.

Bank Negara Malaysia (BNM) has queried the external auditors of lenders that extended a RM2 billion loan to 1Malaysia Development Bhd (1MDB) on how they will treat the unpaid loan in the upcoming full-year audited accounts of the financial institutions.

Sources said the feedback given to the central bank was that it is likely to be categorised as a non-performing loan (NPL), but there will not be any bottomline impact yet as the loan is secured against 1MDB’s power assets.

1MDB had failed to settle the loan, which was originally due on November 30, 2014, despite being given two one-month extensions for the facility. It had also missed the latest January 30, 2015, deadline to pay up.

“BNM was told that it would be classified as NPL but, for the moment, it would have no bottomline impact on the banks because the loans are secured by the power assets [among other things],” one source familiar with the matter said.

“There will be a bottomline impact only if the value of the security drops significantly or if something happens that prevents the banks from taking over the assets.”

Malayan Banking Bhd (Maybank) and RHB Capital Bhd (RHBCap) are the lead lenders, with 58.99% and 32.41% respectively of the RM2 billion loan. The other lenders are Alliance Investment Bank Bhd (4.06%), Malaysia Building Society Bhd (3.24%) and Hwang DBS Investment Bhd (1.29%).

All five are due to release their financial results for the quarter ended December 31, 2014, by end- February. With the exception of Alliance Investment Bank, it will be the lenders’ final quarter for the 2014 financial year.

Alliance Investment Bank’s parent company Alliance Holdings Bhd’s financial year-end is March 31, 2015. HwangDBS Investment is part of banking group Affin Holdings Bhd following a merger that was completed last year.

The Edge weekly, in its latest issue dated February 2, reported that tycoon T.Ananda Krishnan (AK), as the guarantor of 1MDB’s bank loan, could end up offering a RM2 billion interim loan to 1MDB to help it settle the RM2 billion debt.

1MDB bought from AK the assets, housed under Powertek Investment Holdings Sdn Bhd (PIH), in an RM8.5 billion deal back in 2012.

But until and unless there is certainty that such a loan from AK will indeed come through – it is understood that the terms are still being decided upon – the lenders are working on taking a legal position on the non-repayment, a source told The Edge Financial Daily.