Desperate times at 1MDB

QUESTION TIME Recent developments at 1Malaysia Development Berhad (1MDB) have raised fresh concerns over the self-styled national strategic development company, on top of the numerous longstanding concerns it already has.

The changes in decision, flip-flops, contradictory statements and so on indicate an atmosphere of increasing desperation, the overriding reason for the anxiety being money, or more precisely the lack of it.

That is a rather dangerous situation for 1MDB to be in. At last count, end-March 2014, using figures from its annual report, it had borrowings, including some payables, of a massive RM46 billion, liabilities of RM48 billion and assets of RM51 billion.

With RM46 billion in borrowings and only RM13 billion in solid assets in power generation, why is 1MDB so illiquid? It should be floating in a veritable sea of liquidity instead of scrounging around to pay for loans which are coming due.

Here are some recent instances which indicate extreme desperation at 1MDB.

First, there was talk that power assets under Edra Global Energy will be listed to raise money for beleaguered 1MDB. But then with all the negative news coming out, the initial public offer or IPO seemed to be all but jettisoned.

In a surprise development, it was announced that CIMB Group Bhd had been appointed by the Ministry of Finance (MOF) in a role that would “include identifying potential buyers and running a competitive process for Edra to derive an optimal outcome for MOF.”

And then in an even more surprising development a week later, it was announced that CIMB Group will not serve as advisers to the MOF on the potential sale of Edra after the MOF decided it will no longer consider the sale of Edra to strategic investors.

“CIMB has been informed that MOF has decided not to consider a sale of Edra to strategic investors and as such, CIMB’s services as adviser to the potential sale are no longer required,” said the group in a short statement.

The MOF said that Edra will proceed instead with an application to list on Bursa Malaysia. In a space of one week, CIMB Group had a mandate and then did not have one to identify potential buyers for Edra. Strange to say the least.

The MOF also appointed Deutsche Bank and Malayan Banking (Maybank) as advisers for the IPO.

That in itself raises problems of conflicts of interest because both Deutsche and Maybank have lent money to 1MDB and it may be very likely that the proceeds of the IPO will be used to repay part of this debt.

It has been widely reported that Deutsche has given 1MDB close to US$1 billion (about RM3.7 billion) in bridging finance while Maybank was reportedly involved in part of a RM2 billion facility which had come up for repayment in February.

Apr 3, 2015 – Malaysiakin
By P Gunasegaram
Desperate times at 1MDB


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All that is necessary
for the triumph of evil
is for good men
to do nothing.

- Edmund Burke
When the people
fears their government,
there is TYRANNY;
when the government
fears the people,
there is LIBERTY.

- Thomas Jefferson
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