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Amy Chew

Just days after the government announced state investment company 1 Malaysia Development Berhad (1MDB) would dissolve its board of advisers, which is headed by Prime Minister Najib Razak, a well-placed source has revealed that the troubled fund is expected to default on another bond.
The bond is a US$1.75 billion note bearing 5.99 per cent interest, which amounts to US$52.4 million and is due on May 11.
This would be 1MDB’s second default in less than two weeks and adds further pressure on the scandal-plagued state entity that is currently under investigation by several foreign countries for
possible money laundering and embezzlement.
Abu Dhabi’s International Petroleum Investment Co (IPIC) is a co-guarantor of the bond, as well as an earlier 1MDB bond which it defaulted on last week. 1MDB missed making an interest payment of US$50 million due to an argument with IPIC over who should pay it.
Malaysia to dissolve Najib’s 1MDB advisory board amid probes
IPIC said it was prepared to make the interest payments after 1MDB defaulted.
The previous missed payment triggered cross defaults on US$1.9 billion of 1MDB debt, including loans that are guaranteed by the Malaysian government, which owns the company.
“For the second US$1.75 billion bond due on May 11, the same principle for the first bond will apply ... meaning a default,” a senior source in the financial industry told the South China Morning Post.
Based on last week’s events, the source expects “IPIC to make the interest payments” when 1MDB defaults.
The bond was arranged by Goldman Sachs in May 2012 and no interest payments have been missed in the past. The debt was issued by 1MDB Energy Ltd and the proceeds were used to fund the purchase of power assets from the Malaysian billionaire T. Ananda Krishnan.
Malaysia’s 1MDB risks default as UAE partner ends bond support
The first bond was issued by 1MDB Energy (Langat) Ltd and proceeds from the securities were used to fund the acquisition of power assets from Genting Bhd. The holders of the debt are
not known because of the private placement.
Last week, 1MDB President Arul Kanda Kandasamy told the Post that 1MDB would “leave all options open” when asked if there will be more defaults.
Arul said 1MDB was not facing a “doomsday scenario” as the decision “not to pay” was based on “principle” rather than an inability to pay as the firm believed IPIC should pay.
He also said that the firm has US$550 million in cash in its bank accounts.
Malaysian member of parliament Tony Pua, from the opposition Democratic Action Party,
argued that the “1MDB house of cards has all but collapsed”.
Bloomberg reported that apart from the bonds that are co-guaranteed by IPIC, 1MDB also has a US$3 billion bond bearing 4.4 per cent interest that matures in March 2023.
The bond was issued by the 1MDB Global Investments Ltd unit. This debt has a letter of support from the Malaysian government.
1MDB also has a five billion ringgit, 5.75 per cent interest-bearing local currency bond due in 2039.
The fund also has an 800 million ringgit loan from the country’s Social Security Organisation.


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Scandal-riddled 1MDB fund expected to default – again

1MDB missed making an interest payment of US$50 million due to an argument with IPIC over who should pay it. Photo: AFP

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Defaulting will add to the government’s problems and further taint the PM’s international image


Scandal-riddled 1MDB fund expected to default – again

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Defaulting will add to the government’s problems and further taint the PM’s international image

Defaulting will add to the government’s problems and further taint the PM’s international image