1MDB’s debt restructuring plan hits snags

1MDB’s debt restructuring plan hits snags

Differences over valuations slow disposal of real estate; dispute with Abu Dhabi drags on

A complex debt restructuring plan at scandal-torn 1Malaysia Development Berhad (1MDB) is stumbling over delays in the disposal of real estate assets and prickly differences with Abu Dhabi over a dispute involving more than US$6.5 billion (S$9.4 billion) in debt obligations.

1MDB’s prospective project partners and lawyers involved in the troubled sovereign fund’s debt work-outs said the proposed disposal of prime parcels of real estate in Kuala Lumpur and Penang for joint development has been bogged down by disagreements over valuations.

Separately, already tense relations with the Abu Dhabi government over a dispute involving billions of dollars in debt obligations have worsened in recent weeks, after a breakdown of an earlier deal where Malaysia would settle part of the disputed debt as a precondition for both governments resolving the matter through private negotiations, lawyers said.

Malaysia’s Second Finance Minister Johari Abdul Ghani, who is overseeing the debt resolution at 1MDB, acknowledged some of the bumps facing the restructuring plan. But he insisted to The Straits Times that the problems would be ironed out. 1MDB declined to comment.

A special task force headed by Datuk Johari, codenamed the Budiman Committee, was set up to handle the divestment restructuring of 1MDB. “We are pushing ahead (with the debt rationalisation plan). There are many issues, but key milestones, such as the sale of the power assets, have been completed,” he said in an interview.

“Our next move is to kick-start the property development of Bandar Malaysia and TRX.” He was referring to 1MDB’s massive real estate projects on the fringes of Kuala Lumpur. TRX, or Tun Razak Exchange, is an upcoming financial district.

The 1MDB-International Petro- leum Investment Company (Ipic) dispute is related to a deal last year in which the Abu Dhabi fund guaranteed US$3.5 billion of 1MDB bonds when they were issued in 2012. Last year, when 1MDB was short on cash, Ipic also agreed to give an emergency US$1 billion loan and make interest payment on the same bonds.

1MDB was to repay the loan through an Ipic subsidiary, but Ipic in April revealed for the first time that it never received the money.

1MDB’s debt restructuring plan hits snags
23 Dec 2016 – straitstimes.com


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