President of Malaysia’s Embattled 1MDB Says My Job Is Done Here
“We don’t need any money from our shareholders to get us to 2039” when the last bonds are due, said Kanda. “There is no bailout of 1MDB.”
(Bloomberg) – Former investment banker Arul Kanda took a job in Malaysia last year and walked into the crossfire of the country’s biggest political crisis since Prime Minister Najib Razak came to power in 2009.
Now, even as the finances of 1Malaysia Development Bhd. are being investigated in at least three countries, Kanda, president of the government-linked fund, says his job sorting out the organization is done.
“I only signed up for one-third of what I ended up doing,” he said in an interview on Wednesday at the fund’s headquarters in Kuala Lumpur. “I did not sign up for the investigations because that happened after I joined, and I definitely didn’t sign up for the extent of the comms-slash-politics that I had to deal with.”
Kanda was brought in in January 2015 when the debt-ridden fund was teetering on the edge of default. Within months the company became embroiled in allegations of financial irregularities that sparked probes in Malaysia, Singapore and Switzerland. 1MDB, whose advisory board is headed by Najib, has consistently denied wrongdoing.
Kanda echoes statements by Najib and other government officials that the allegations are unfounded and politically motivated. He said 1MDB hasn’t been contacted by any foreign legal authorities to help with investigations.
‘Politicized’ Allegations
“The misunderstandings about 1MDB stem from the fact that what was a business problem became politicized and became a tool by the opposition or those not aligned with the government to topple a democratically-elected prime minister and government,” he said. “That’s the reality of it.”
He says his job was to turn 1MDB around and sort out its debt.
“From my perspective, I’m done,” said Kanda, a trained lawyer. “Everything’s signed. Legal agreements are there, they’re binding. I’m leaving the company” with available funds, he said.
Kanda, who signed up for a three-year term at the fund, clarified on Thursday that he is not resigning from 1MDB, according to a company spokesman.
Loan Repayment
1MDB will repay 6 billion ringgit ($1.5 billion) in the next three weeks, leaving it free of short-term debt and bank loans and with at least 2.3 billion ringgit in the bank, Kanda said. It announced last week the settlement of a 700 million ringgit syndicated term loan. 1MDB will also sign a term sheet for the development of its land parcel in the state of Penang in about two weeks, he said.
“We don’t need any money from our shareholders to get us to 2039” when the last bonds are due, said Kanda. “There is no bailout of 1MDB.”
Set up by the government in 2009 to build infrastructure with borrowed money, 1MDB amassed about 42 billion ringgit of debt in less than five years, largely from assets in the energy sector. Its borrowings clouded the sovereign credit rating, weighing on the government’s contingent liabilities. The government said on Thursday that 1MDB’s finances won’t have an impact on its fiscal policy.
It started facing cash-flow problems in 2014 after a planned initial public offering of energy unit Edra Global Energy was delayed by an unfavorable market. Kanda raised money to pay the debt by selling assets including Edra, which was bought by China General Nuclear Power Corp. for 9.83 billion ringgit.
Financial District
Kanda said 1MDB will retain land and assets that will allow it to pay off outstanding bonds. They include the 70-acre Tun Razak Exchange financial district, or TRX, in downtown Kuala Lumpur, named after Najib’s father.
“Why don’t I want to sell it off today and pay off the debt? Because I think it’s going to be worth more over time.”
1MDB’s 2023 notes traded on Thursday at a level last seen in April 2015, according to Bloomberg-compiled prices. Investors would have gained 30 percent if they’d bought the securities at their lowest point of 71.6 cents on Oct. 2. The bonds were sold at par of 100 cents in March 2013 in a deal arranged by Goldman Sachs Group Inc. and rated at A- or four levels above junk by Standard & Poor’s.
