Dealings between 1MDB and IPIC/Aabar and US$1.0 billion termination of options

IPIC getting 1MDB’s BSI assets for US$1.0 billion?
(June 2015 – The Edge)

Last Sept 1, 1 MDB took the US$975 million loan to pay IPIC/Aabar US$1.0 billion to terminate an options that 1MDB had given them to subscribe for up to 49% of the future listing of the power assets owned by 1MDB, a prospect that is now very bleak.

That Deutsche Bank loan was secured against what was initially said by 1MDB and Prime Minister Datuk Seri Najib Tun Razak to be US$1.103 billion cash in the Swiss private bank BSI branch in Singapore. It is now revealed that the account had no cash but only unexplained paper assets said to be worth US$1.103 billion.

Whether the mix-up was caused by a deliberate attempt to mislead or a genuine misunderstanding is now the subject of a raging debate and investigation.

What Husni announced last Friday was simply that IPIC/Aabar was returning what it took from 1MDB last year. What he did not disclose, and which we have since found out (read story above), was that for getting the cash back, 1MDB is handing over the US$1.103 billion assets in the BSI account to IPIC/Aabar.

This, in effect, means there is no net gain for 1MDB from the swap.

Indeed, we understand that the transaction is subject to a revaluation of the assets in the BSI account and that 1MDB may even have given IPIC/Aabar a put option whereby 1MDB has to buy back those assets at a pre-determined price and at a pre-determined time.

It really will not surprise us if there is such an agreement as the track record of their dealings show this to be something that the two sides do.

The whole problem over the Deutsche Bank loan was caused by the options that 1MDB gave to IPIC/Aabar in 2012 to subscribe for up to 49% of the future listing of its power assets.

This was because IPIC had co-guaranteed two bonds totalling US$3.5 billion that was issued by 1MDB to finance the acquisition of power assets from Tanjong and the Genting Group.

In return for the co-guarantee, IPIC got to keep RM4.25 billion from the net proceeds of RM9.3 billion as refundable security and was also given the options.

Given the opaqueness of everything it does, we would like to ask Husni and 1MDB’s CEO Arul Kanda Kandasamy these questions:

Does the payment of US$1.0 billion that IPIC/Aabar will make on June 4 to 1MDB come with the following conditions:

1. 1MDB has to hand over the assets in the BSI account in Singapore to IPIC/Aabar?

2. IPIC/Aabar have the option to sell these assets back to 1MDB or the Ministry of Finance or other government entities at a pre-determined valuation and pre-determined time?

3. Is there an interest cost to the US$1.0 billion that 1MDB has to pay?

4.And by the way, what is the status of the RM4.25 billion of 1MDB’s money that IPIC has kept since 2012? Shouldn’t 1MDB get it back since the options have been terminated?

Husni and Arul, in the name of transparency and good governance, please answer these questions.

This article first appeared in The Edge Malaysia Weekly, on June 1 – 7, 2015.

IPIC getting 1MDB’s BSI assets for US$1.0 billion?
June 03, 2015 – The Edge Malaysia


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