Why did 1MDB put RM7bn bond redemption in Cayman Islands outfit?
Posted by Anil Netto, anilnetto.com
Some serious questions are being raised about the proceeds of 1MDB’s RM7bn bond redemption, arising from the disposal of its investment in a joint venture with Petro Saudi International (PSI).
1MDB had disposed of its interest in 1MDB International Holdings Ltd (1MDB-IHL), which had acquired a 49 per cent stake in PetroSaudi Oil Services Ltd (PSOSL), for US$2.3bn.
1MDB then invested the proceeds in shares in a ‘segregated portfolio company’ in Cayman Islands.
The key question being raised in the business press is why place these proceeds outside the country when 1MDB has borrowed so much to finance its acquisition of power assets (from Genting and Ananda Krishnan’s Tanjong Energy) and property within the country. (1MDB, it must be pointed out, was actually set up to draw high-impact foreign investment into projects within the country.)
1MDB’s debt has been growing. Its profits in the financial years 2010 and 2011 were largely due to the revaluation of assets. 1MDB is involved in the Tun Razak Exchange and Bandar Malaysia projects “on land acquired cheaply from the government”.
According to The Edge (1 April), 1MDB’s long-term debts are as follows:
Islamic medium-term notes (30 years) RM5bn
AmBank term loan RM2.5bn
StanChart term loan US$300m
10-year bonds US$1.75bn
Financing for Genting Sanyen Power assets RM2.3bn.
Recently, eyebrows were raised when 1MDB CEO Shahrol Azral Halmi was replaced.
Of interest is that The Edge reported that Jho Low, who is close to Najib’s family, was “a key person” in the creation of 1MDB, which morphed from the Terengganu Investment Authority. Low is helping the so-called “1Malaysia Penang Welfare” to organise a “charity concert” in Penang on 20 April featuring imported celebritites.
The Edge also reported that the issuance of the RM5bn in term notes “was handled by AmBank Group but the bulk of the profits went to individuals who placed out the paper in the secondary market for handsome gains”. Who were these individuals?
There’s more to this story, no doubt, but all this is enough for us to pay extra attention to what is happening with 1MDB. After all, some of its bond debts are backed by the government – that’s our money at stake. Improved transparency would help, but don’t count on it.
Update: Jho Low says he is not involved in all this wheeling and dealing:
Jho Low @jho_low
@gst183 @anilnetto Bro, pls read previous interviews. Made clr since may 2009 of TIA, not involved so better u ask them. Thanks.
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