New chief of Malaysia's 1MDB aims to slash debt, list power plant assets

In his first week on the job, the new head of loss-making Malaysian state investor 1MDB has had a ringside view of his future challenges: a missed loan payment that spooked bond and currency markets, and a possible delay in an ambitious asset sale he must pull off to cut a debt pile of nearly US$12 billion.

Former Gulf-based banker Arul Kanda also began work this week knowing success or failure could affect the man who chairs the fund's advisory board, Prime Minister Najib Razak.

With Najib at the helm, 1MDB's expensive acquisitions of power plants it now wants to sell have left it servicing growing debt costs that have squeezed it into the red.

With influential opposition politician Tony Pua dubbing 1MDB "a ticking time bomb", analysts say a deeper liquidity crisis at the state firm could place strain on Malaysia's debt ratings. The firm's finance costs jumped by half in the 12 months ended March 2014, tipping the firm into a 665.4 million ringgit (HK$1.4 billion) loss.

That has brought fresh urgency to 1MDB's plans to spin off power plants assets in an initial public offering worth about US$3 billion, possibly Southeast Asia's fifth-biggest IPO ever. Already long-delayed, the sale is not now expected until the second quarter as Kanda works on overhauling the firm, and convincing potential investors.

"My mandate at 1MDB includes undertaking a strategic review of the business," Kanda said earlier this week in an emailed response to questions, without saying whether any areas of the firm's operations will be a specific focus for the review. "As part of this, I will be undertaking a thorough and analytical examination of the business and our operations."

1MDB officials said Kanda could not answer questions on plans for the IPO, nor the firm's failure to repay a two billion ringgit bridge loan that was due end-December. 1MDB is now exploring ways to settle the payment to Malaysian lenders by January 30, people close to the matter said.