1MDB denies Putrajaya guaranteed US$4.71b deal with Abu Dhabi firm
(Malay Mail Online) – 1Malaysia Development Bhd (1MDB) today denied receiving a guarantee from Putrajaya for a US$4.71 billion (RM17.7 billion) deal with Abu Dhabi-based oil firm International Petroleum Investment Company (IPIC).
The fund claimed that Putrajaya had only issued a “letter of support” for the agreement with IPIC, and even then, it was for a different bond it issued worth US$3 billion.
This, said 1MDB, puts the government’s explicit guarantees for 1MDB at only RM5.8 billion and not RM36.2 billion as alleged earlier today by DAP MP Tony Pua.
“Neither the Ministry of Finance, nor the Government of Malaysia, have provided guarantees for the recent commercial transaction between 1MDB and IPIC,” 1MDB said in a statement.
“It is publicly known that IPIC issued guarantees, in 2012, for the payment of interest and principal on two US$1.75 billion bonds issued by 1MDB, totalling US$3.5 billion of principal and up to US$2 billion of interest. “
“The government has not guaranteed either of these bonds,” it added
Pua had questioned earlier today Putrajaya’s alleged decision to guarantee the deal with IPIC to help 1MDB meet its debt obligations, saying the agreement reeked of another attempted bailout of the troubled state-owned investment firm.
The Petaling Jaya Utara MP urged Prime Minister Datuk Seri Najib Razak to explain what he described as a “shocking development”, noting that the guarantee, which he said was indicated in IPIC’s recent announcement on the London Stock Exchange, ultimately puts the total amount to be borne by the government should 1MDB fail to repay its loans to a staggering RM36.2 billion.
According to Pua, Putrajaya had provided a guarantee for a total sum of US$4.71 billion (RM17.7 billion) to IPIC so that in the event 1MDB is unable to fulfil its obligation to transfer assets worth the same value to the oil company June 30 next year, the government will indemnify IPIC by assuming the obligations.
But 1MDB said Pua had misled the public by failing to mention the “and vice versa” clause on indemnity, pointing out that this meant that “indemnity” applies to both parties.
“Such a two-way indemnity is a standard clause in commercial transactions to ensure neither party is ‘out of pocket’ for non-performance by the other.
“1MDB confirms that it fully intends to perform its obligations under the binding term sheet,” the firm said.
1MDB also said that the binding term sheet with IPIC is part of the 1MDB rationalisation plan announced by Finance Ministry in May 29, 2015, which will result in 1MDB reducing its debt by RM16 billion.
Earlier this month, Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah announced that 1MDB would receive a US$1 billion injection from Abu Dhabi’s International Petroleum Investment Company (IPIC) and its subsidiary Aabar Investments.
The sum was meant to help 1MDB pay off a US$975 million loan in advance of its due date to a consortium of international bank lenders.
The repayment was also to eliminate the risk of a cross default on the entirety of 1MDB’s RM42 billion in debts had the consortium declared the state-owned strategic investment firm to be delinquent.
