1MDB pulls out of the Cayman Islands
By Martin Carvalho, Yuen Meikeng, and Loshana K. Shagar from The Star
1MALAYSIA Development Bhd’s (1MDB) RM7.18bil in offshore accounts in the Cayman Islands is expected to be channelled back to the country by December.
“Sixty per cent of the money is already back. The remaining 40% will be brought back by the end of this year,” Deputy Finance Minister Datuk Ahmad Maslan said in his reply to Tony Pua (DAP-Petaling Jaya Utara) when winding up his ministry’s debates on Budget 2015.
He said the repatriation would be done despite the profits of between 6% and 7% per annum from the investments.
Later, when met at the Parliament lobby, Ahmad said the money was being brought back to fund 1MDB’s projects such as the Tun Razak Exchange and Bandar Malaysia development projects.
He said this excluded the money used to finance the sovereign wealth fund’s power plant projects and loan servicing.
As to how the money would b
e managed, he said 1MDB would rely on its own consultants.
The issue over 1MDB’s Cayman Islands accounts was raised by several parties, including Opposition lawmakers who had expressed concerns that the money would “disappear”.
In a statement in April last year, 1MDB clarified that the allegations were baseless and were an election ploy by certain quarters.
In a follow-up, 1MDB issued a statement yesterday saying that the funds that had been brought back amounted to RM4bil.
Meanwhile, Ahmad also revealed that for RON95 petrol to be priced at RM2.30 a litre without any Government subsidy, global crude oil prices must be between US$75 and US$80 (between RM250.40 and RM267.10) a barrel.
As of yesterday, the global crude oil price according to the Brent standard stood at US$83 (RM277.10) a barrel.
Ahmad said this in response to Pua, who asked what was the “break-even point” between petroleum subsidy and global crude oil prices.
On the 1Malaysia People’s Aid (BR1M), Ahmad said the Government would continue with the programme promised under its election manifesto.
The target, he said, was to see a maximum BR1M amount of RM1,200 to be given to qualified recipients during this five-year period.
For more on this story go to: http://www.thestar.com.my/News/Nation/2014/11/07/1MDB-pulls-out-of-Caymans-RM718bil-expected-to-be-back-by-years-end-says-Ahmad/
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1MDB accounts reveal TRX money trail
From The Star
1Malaysia Development Bhd (1MDB) used nearly half of the US$3bil (RM9.3bil) raised as seed capital for work on the Tun Razak Exchange (TRX) to repay its debts and as working capital.
It is not disclosed if the amount utilised as working capital was channeled towards developing the massive project.
The capital raised was earmarked for investments in strategic and high-impact projects such as the TRX development. Its latest financial accounts reveal that 1MDB has placed US$1.56bil, the remaining amount of the US$3bil raised for the TRX project, with a reputed financial institution.
“In 2014, the remaining net proceeds (US$1.56bil) have been utilised by the company for working capital and debt repayment purposes. In the previous financial year, the remaining net proceeds had been placed in time deposits and cash accounts with the said financial intitution for the purpose of cash management,” it says in its financial report.
1MDB Global Investments Ltd, a subsidary company, issued debt worth US$3bil on March 19, 2013, and in April of that year, 1MDB said: “The proceeds from the US$3bil capital raised are being utilised for investments in strategic and important high-impact projects like energy and strategic real estate, which are vital to the long-term economic growth of both countries.”
The accounts also revealed the movements of 1MDB’s US$2.3bil (RM7.1bil), which are proceeds from its 1MDB-PetroSaudi International joint venture (JV), which had been placed with a fund in the Cayman Islands.
1MDB in its latest annual report revealed that the monies that are placed in the segregated portfolio company in the Cayman Islands, amounting to US$2.33bil, are to be returned to Malaysia no later than the end of the year, and that so far, it has received US$1.22bil.
The balance, including a dividend of US$131.7mil, will be returned to 1MDB by the end of this month, according to the accounts.
This is based on a decision taken by the board of directors on Aug 1 this year, authorising the redemption to be not later than Dec 31 this year. The chairman of the board is Tan Sri Lodin Wok Kamaruddin.
The latest report also says that the fair value of 1MDB’s investments as at end-March this year was RM12.9bil, and the company has classified these investments as assets available for sale, as the management of 1MDB intends to liquidate the investments to fund the TRX project undertaken in a 50:50 JV company.
A feature of assets under management is that they would not be subjected to `mark to market’ valuations, meaning they would not be subjected to current market valuations.
TRX is undertaken by Abu Dhabi Malaysia Investment Company (ADMIC), 1MDB and its partner Aabar Investments PJS.
The project is estimated to generate a gross development value of RM26bil and attract 250 of the world’s leading companies, creating 40,000 new job opportunities for knowledge workers, the company said in its April statement last year.
For more on this story go to:
Rafizi to tell all about 1MDB’s Cayman fund next week
From Yahoo Mail
PKR secretary-general Rafizi Ramli said he will reveal next week the details of 1Malaysia Development Berhad’s (1MDB) funds in the Cayman Islands.
“Besides myself, a team from the National Oversight and Whistleblowers (NOW) will reveal the individuals and companies involved in the hiding of public funds in the Cayman Islands.”
He said in a statement that although Deputy Finance Minister Datuk Ahmad Maslan said the funds were being brought back to Malaysia, that was a separate issue.
“The Finance Minister and those involved in these clandestine dealings cannot just wash their hands of this issue by saying the funds are being brought back.
“The individuals and companies who were responsible for the funds being parked in the Cayman Islands should be held accountable for this expensive mistake.”
Rafizi said he was shocked when Ahmad denied that Putrajaya was the guarantor for 1MDB’s debts, which have spiralled to RM41 billion.
“I have a copy of the loan agreement which clearly states that Putrajaya guarantees all of 1MDB debts,” he said, adding that it was written in a vague and roundabout manner.
“The bottom line is that Prime Minister Datuk Seri Najib Razak’s administration wants to hide behind technical reasons that the rakyat are guarantors for 1MDB’s debts.”
Rafizi said he will make public the copy of the loan agreement in Parliament on Monday at 11.30am.
He said if Ahmad did not clarify his statement before then, he would submit an emergency proposal in Parliament.
“I will refer Ahmad to the parliamentary special committee for lying in Parliament.”
Ahmad said in Parliament yesterday the sovereign fund was bringing back the RM7.18 billion it had invested in the Cayman Islands.
He said the fund had already brought back 60% of its funds, and the balance 40% will return to Malaysia by year-end, despite the good returns that 1MDB had earned at the end of 2013, between 6% and 7%.
“So, there is no reason to claim that the money is lost, as accused by various quarters.”
1MDB is Malaysia’s second sovereign wealth fund after Khazanah Nasional Bhd.
Critics have long questioned the its heavy debts, usage of funds and opaque operations.
In September, former prime minister Tun Dr Mahathir Mohamad wrote in his blog that 1MDB had already incurred a RM38 billion debt in just five years of its operations.
He was worried that Putrajaya, already facing a deficit budget, would not have the ability to help pay 1MDB’s debt.
He also said a large part of the money raised from the issue of debt paper by 1MDB was sent to the Cayman Islands, a move which many questioned.
In April last year, 1MDB brushed aside allegations that the investment was put in Cayman Islands companies and would vanish, saying they were baseless and an election ploy.
“1MDB has earmarked the proceeds for investments in the near future. Pending that, these funds for cash management purposes are currently placed under regulated and licensed international fund managers managing Cayman Island-based international standard fund structures,” it said.
Confident about 1MDB’s world-class advisers, Ahmad said Putrajaya would leave it to the fund to decide who managed the RM7.18 billion.
He said some of the funds which had been brought back have been used for investments in 1MDB’s projects such as the Tun Razak Exchange and Bandar Malaysia developments.
It had also been used to pay off its debts and for the purchase of power plants, which the fund had stakes in, he added.
In addressing the allegations levied against the fund, Ahmad said Putrajaya had only issued an explicit guarantee letter to the RM5.8 billion loan taken by 1MDB.
He also insisted the fund did not make third-party payments or overpaid investment bank Goldman Sachs International for bonds issued in 2012 and last year.
1MDB had been accused of paying Goldman Sachs fees of about 10%, which was an above-market rate.
“No fees were paid to any third parties, in fact Goldman Sachs is shouldering risks by doing the fund-raising exercise for 1MDB.” – November 7, 2014.
For more on this story go to: https://my.news.yahoo.com/rafizi-tell-1mdb-cayman-fund-next-week-082129138.html
Report details 1MDB’s power plant power purchase terms
By: GURMEET KAUR, LEONG HUNG YEE From The Star
PETALING JAYA: 1Malaysia Development Bhd’s (1MDB) latest annual report for the financial year ended March 31, 2014, has revealed details on the salient terms for its purchase of power plants in 2012 that had paved the way for its fast-track entry into the sector.
Based on the deals it had entered into with the Usaha Tegas group and International Petroleum Investment Company PJSC (IPIC), 1MDB’s entry cost is estimated to be as high as RM4.29bil for the purchase of the Powertek and Genting power plants, which eventually led to it getting three other power plant projects in the country.
The cost comprises the goodwill incurred, the cost to buy out IPIC’s options, the cost to buy out the option from Usaha Tegas should it not convert its warrants to equity in 1MDB’s power division listing, and the fees paid to Goldman Sachs to raise US-dollar debt papers tied to the purchase of the two power plants in 2012.
This does not include the opportunity cost of putting an estimated RM4bil in as deposit that was held as collateral for the IPIC guarantee.
In the same annual report, 1MDB revealed that it would get a dividend of RM435mil from its US$2.3bil (RM7.1bil) invested in a Cayman Islands-based Segregated Portfolio Co (SPC) and managed by a firm in Hong Kong. The amount is paltry compared with the cost incurred in making its foray into the power sector.
According to the annual report, 1MDB had incurred a goodwill of RM2.6bil to buy the power plants owned by Tanjong plc and the Genting group in 2012. The goodwill is part of the RM10.88bil that 1MDB had paid for these power assets to mark its foray into the power sector in which it had no track record.
During the purchase, 1MDB also issued US$3.5bil debt papers in two tranches of US$1.75bil each. The papers were issued by 1MDB Energy Ltd and 1MDB Energy (Langat) Ltd.
One of the tranches – 1MDB Energy Ltd – was arranged by Goldman Sachs, and according to a weekly, the fees incurred was RM627.84mil (US$196.2mil).
The US-dollar debt papers were secured by guarantees from IPIC, a company backed by the Abu Dhabi Government.
IPIC came into the picture as the owner of the Tanjong power plant was not comfortable with guarantees from 1MDB, as it would have been perceived to be receiving favours from the Government. This is because 1MDB is wholly owned by the Federal Government.
Subsequently, IPIC guaranteed the US-dollar debt papers to the tune of US$3.5bil (RM11.2bil) to facilitate 1MDB’s purchase of the power plants from Tanjong and Genting.
In return for the corporate guarantee from IPIC, 1MDB had given a 10-year option to Aabar Investments PJS to acquire up to a 49% equity interest in the Tanjong and Genting power plants when the energy division goes for listing.
The annual report stated that 1MDB had taken a bridging loan facility worth US$250mil (RM836mil) in May this year and that the proceeds were used to extinguish the options granted to IPIC.
Bankers said 1MDB’s entry into the power sector would have cost less had it utilised the US$2.3bil funds invested with the SPC in the Cayman Islands.
1MDB, also in the report, revealed that the monies that have been placed in the SPC in the Cayman Islands are to be returned to Malaysia no later than the end of the year, and that so far, it has received US$1.22bil (RM4.03bil). In the report, 1MDB said it had used part of the money it had received from the SPC as payments pursuant to the settlement of the put option with Aabar.
Apart from Aabar, the accounts also revealed that 1MDB had repaid a sum of RM670mil of the RM6.17bil bridging loan taken to purchase the Powertek power plants from the Tanjong group.
In April this year, 1MDB kicked off the listing of 1MDB Energy, slated for some time by the first quarter of next year. Bankers said 1MDB could end up with a higher stake of up to 51%, following the cancellation of options given to Aabar to subscribe in the listing of its power unit.
If Aabar had converted its option, 1MDB’s stake in the listing of its power division would have been diluted.
According to bankers, 1MDB Energy’s initial public offering (IPO) has to raise a minimum US$3bil, given its high entry cost into the power sector. StarBiz had earlier reported that 1MDB’s much-anticipated listing of its power arm, 1MDB Energy, may offer an indicative dividend yield of 2.5% to 3.5%.
Based on its latest annual report, 1MDB seems to have extracted better value from the purchase of a 75% stake in Jimah Energy Ventures Holdings Sdn Bhd, which was completed in January this year. A goodwill of RM669.5mil was incurred for Jimah for which 1MDB had paid RM1.2bil. The goodwill for Powertek, meanwhile, was RM1.83bil, while for Genting’s power asset, it was RM787.3mil.
1MDB still owes Usaha Tegas RM2bil outstanding from the purchase of the power plant, for which Usaha Tegas has been given the option to convert the debt to an equity stake in the power division of 1MDB when it goes for listing.
Tanjong has the option to exercise the 214 million warrants or request a cash settlement from 1MDB Energy. If Usaha Tegas, the owner of Tanjong, chooses to exercise the warrants, then it could hold up to 15% in the listed entity.
If the cash settlement is opted for, then the amount to be paid would be the institutional price of the proposed IPO less 7.5% discount or 3.88% compounded annual return rate from RM2bil commencing May 2012, whichever is higher, the annual report stated.
Assuming that the warrants are settled by cash, then 1MDB Energy would have to fork out an additional RM200mil or so above the RM2bil that is owed to Usaha Tegas.
For more on this story go to: http://www.thestar.com.my/Business/Business-News/2014/11/11/Expensive-foray-Latest-annual-report-details-1MDBs-terms-with-IPIC-and-Usaha-Tegas-for-purchase-of-p/?style=biz
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[With other links] Published May 12 2014 “Mystery of Malaysian 1MDB’s US$2.3b Cayman Islands fund” at: http://www.ieyenews.com/wordpress/mystery-of-malaysian-1mdbs-us2-3b-cayman-islands-fund/
