Prove ability to repay RM3.6b loan, 1MDB told
KUALA LUMPUR, May 14 ― 1Malaysia Development Bhd (1MDB) must publicly prove its ability to repay its RM3.6 billion loan with a Deutsche Bank-led consortium instead of using “banking confidentiality” as an excuse to avoid addressing the matter, DAP’s Tony Pua said today.
The Petaling Jaya Utara MP pointed out that while no one was asking 1MDB to reveal the loan agreement, the state investment fund must disclose whether they will be able to repay the loan to the consortium of six foreign banks in a timely manner.
“1MDB CEO Arul Kanda Kandasamy should not hide behind the skirt of ‘banking confidentiality’ to avoid responding as to whether 1MDB will be fulfilling its US$975 million debt (RM3.6 billion) obligations to a consortium of six foreign banks.
“It will also provide great comfort to Malaysians if 1MDB can prove its ability to repay the loan,” Pua said in a statement, adding that previously 1MDB had to rope in local billionaire Tan Sri Ananda Krishnan to arrange a group of private investors to help pay off a RM2 billion local loan.
“The excuse provided in the reply is highly irresponsible and is the reason why the entire market is flooded with various speculations, true and wild as 1MDB has failed to address key questions in a frank and transparent manner,” the DAP man added.
Pua said that as a result, confidence in the financial markets has been shaken and the Malaysian ringgit has been adversely affected.
He also demanded 1MDB disclose whether the US$1.103 billion parked in BSI Singapore is held in cash or just “paper assets”, as there have been conflicting information on the matter.
“None of the above questions involved the ‘confidential’ details of the lending agreement,” Pua insisted.
Yesterday, 1MDB’s chief executive Arul said the state investment arm will “update” the market about the status of its RM3.6 billion loan with a Deutsche Bank-led consortium once it is in the position to do so.
Arul Kanda said the firm cannot discuss details of the loan at the moment due to the confidentiality of the deal, but said they intend to explain the matter when possible.
According to Singapore’s Business Times, lenders spooked by the controversy surrounding 1MDB are contemplating demanding the full settlement of a US$975-million (RM3.6 billion) loan ahead of its due date in August.
More worrying for the state-owned investor is that the consortium led by the Deutsche Bank Singapore could trigger cascading defaults on the remainder of 1MDB’s reported RM42 billion debt if they declare the firm to be delinquent.
The consortium’s fears are said to be prompted by “incomplete” documents that 1MDB provided as a form of security, rendering the terms of the loan unmet. This alleged breach allows the banks to rescind the loan ahead of the August due date.
The loan was secured via the US$1.103 billion that 1MDB said was being held by its Brazen Sky unit in BSI Singapore, originally from a tranche of offshore deposits it previously kept in the Cayman Islands.
BT said the banks and 1MDB are currently in “intense negotiations” to prevent a recall of the loan that the Malaysian state investor took to pay Abu Dhabi’s International Petroleum Investment Company (IPIC) to terminate an option to subscribe for the future listing of 1MDB’s power asset, Edra Energy.
