1MDB defaults if RM2 billion loan not paid by February 18, say bankers

By admin-s On Feb 11, 2015

(TMI) – Malaysian bankers will trigger an event of default (EOD) if state strategic investor 1Malaysia Development Bhd (1MDB) fails to repay a RM2 billion loan for its power unit taken in May 2014, say sources.

The loan has been rolled over twice with the last deadline being last month and is part of a RM5.5 billion debt taken by a unit of the company wholly owned by the Finance Ministry.

The 1MDB subsidiary, Powertek Investment Holdings Sdn Bhd, took the loan last May to refinance a RM6.17 billion bridging loan taken in 2012 to part finance the purchase of power assets.

The remaining RM3.5 billion has been converted into a 10-year term loan due in August 2024.

“A line has been drawn in the sand and its February 18 or the EOD will be triggered,” a source familiar with the matter told The Malaysian Insider.

Maybank has 58.99% of the RM2 billion loan while RHB has 32.41%. The other lenders are Alliance Investment Bank Bhd (4.06%), Malaysia Building Society Bhd (3.24%) and Hwang DBS Investment Bhd (1.29%).

Other sources have confirmed that a letter to that effect has been sent to 1MDB, which has been negotiating a loan with tycoon T. Ananda Krishnan to repay the debt.

It is not known if the media-shy billionaire has agreed to provide the loan. But critics say it is unprecedented for a government-owned firm to be indebted to a citizen.

EOD is an action or circumstance that causes a lender to demand full repayment of an outstanding balance sooner than it was originally due.

Other sources have confirmed that a letter to that effect has been sent to 1MDB, which has been negotiating a loan with tycoon T. Ananda Krishnan (pic, left) to repay the debt.

It is not known if the media-shy billionaire has agreed to provide the loan. But critics say it is unprecedented for a government-owned firm to be indebted to a citizen.

EOD is an action or circumstance that causes a lender to demand full repayment of an outstanding balance sooner than it was originally due.

According to financial website Investopedia, a lender will usually include a contract provision covering events of default to protect itself in case it appears that the borrower will not be able to or does not intend to continue repaying the loan in the future.

An event of default enables the lender to seize any collateral that has been pledged and sell it to recoup the loan.