1MDB misses payment deadline

1MDB misses payment deadline

KUALA LUMPUR: 1Malaysia Development Bhd (1MDB) has confirmed it has missed the July 31 deadline to pay International Petroleum Investment Co PJSC (IPIC) US$600 million (RM2.57 billion) as it has yet to receive funds needed to meet the payment obligation.

In a statement yesterday, 1MDB, now a wholly-owned unit of the Ministry of Finance Inc (MoF Inc), said it is “awaiting funds that were due to be received in July 2017”. Due to the need for additional regulatory approvals, the receipt of those funds has been delayed to August 2017.

As a result, 1MDB said it has written to IPIC to inform that it would meet the payment obligation in “August 2017”.

In a filing with the London Stock Exchange, IPIC announced it has not received the payment of US$602.7 million plus US$26 million upon the July 31 deadline. IPIC also warned of a possible fine or compensation for the failure to meet the payment obligation.

“There is a five business day period for MoF Inc and 1MDB to remedy the non-payment before MoF Inc and 1MDB become subject to additional obligations to IPIC and Aabar Investments PJS,” said the filing in London.

The amount due is part of the US$1.2 billion that 1MDB had agreed to pay under the settlement agreement that IPIC and 1MDB had reached in April.

Under the settlement agreement, 1MDB had agreed to pay back US$1.2 billion to IPIC for a US$1 billion loan plus a US$200 million interest payment that IPIC, the guarantor of the US$3.5 billion bond issued by 1MDB, had made on behalf of 1MDB in 2015.

The two instalments were originally slated for July 31 and Dec 31.

1MDB’s failure to make payment once again casts the spotlight on the controversial strategic fund.

Some quarters opine that the late payment indicates the international banking community has become extra cautious about money coming from 1MDB after the US Department of Justice’s (DoJ) civil forfeiture action on US$1.7 billion worth of assets, allegedly linked to an international conspiracy to launder funds misappropriated from 1MDB.

The scope of the DoJ’s civil asset forfeiture could be much wider. Based on complaints, the DoJ estimates a whopping US$4.5 billion worth of 1MDB funds had been misappropriated from 2009 to 2015.

Regulatory approvals aside, others also raised the question of whether 1MDB actually has sufficient cash to pay.

In April last year, 1MDB chief executive officer Arul Kanda Kandasamy told The Edge Malaysia weekly that 1MDB had RM2.3 billion in cash. “We can manage this between now and 2022 [when the US$3.5 billion bonds are due for redemption],” he said back then.

1MDB misses payment deadline
The Edge Financial Daily
August 02, 2017


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