By Khairul Khalid
Arul Kanda
1Malaysia Development Bhd (1MDB) has decided not to undertake anymore new projects, said Arul Kanda, 1MDB’s president and group executive director after a strategic review of its business.
“The company will now focus on its core businesses. No new investments or projects will be undertaken. Furthermore, no new debt will be raised except in order to refinance existing debt, meet existing liabilities, and/or on a non-recourse, project finance basis, as needed,” said Arul in an official statement.
The controversial state company has been under fire in recent months due to it heavy debts – up to RM42 billion as of March 2014. Last week, the company settled a RM2 billion debt that were due to several banks. The loan had been extended several times.
The debt ridden 1MDB is a strategic development company wholly owned by the government of Malaysia. Prime Minister Najib Razak is chairman of 1MDB’s board of advisors.
There were strong rumours, since refuted as “speculation” by 1MDB, that telecommunications tycoon Ananda Krishnan was in negotiations to rescue the ailing 1MDB.
Pandan MP Rafizi Ramli yesterday suggested that 1MDB-Ananda talks may have broken down, and Putrajaya had stepped in to bailout 1MDB through a series of treasury bills amounting to RM2.1 billion issued by Bank Negara.
So far, 1MDB has not issued an official response to KiniBiz’s query on Rafizi’s allegations.
In the statement on 1MDB’s strategic review, Arul admits that dealing with 1MDB’s huge debts is a critical issue.
“We recognise that our debt financed capital structure is no longer appropriate for the company, and intend to take measures to ensure that 1MDB and the standalone entities are well positioned to service debt and infrastructure obligations,”said Arul.
The 1MDB president also says that the there is a need for more direct matching of 1MDB’s assets and cash-flows.
“TRX and Bandar Malaysia will sell land development rights and/or enter into profit-sharing joint ventures, for example, with government linked investment companies as well as with Malaysian and international private sector companies, who can contribute not only development expertise but also equity and debt to finance specific projects,” said Arul.
Arul also outlined other outcomes and conclusions of 1MDB’s comprehensive strategic review, initiated early last month, that have been endorsed by the board of directors.
• Edra Energy, TRX and Bandar Malaysia will be run as standalone entities, with independent governance structures, and responsibility for their own operations and finances. Both entities will continue to be ultimately owned by the Ministry of Finance, thereby ensuring that their significant future value benefits the rakyat;
• Edra Energy to focus on its core existing projects, and the company to be monetised in 2015, with a portion of the proceeds being invested in the business for future growth and remainder going towards repayment of 1MDB’s short term debt;
• Air Itam and Pulau Indah land to be monetised through joint ventures or outright sale;
• Maturing debt to be met via refinancing from best available sources or repaid from sale of land development rights, raising of external equity from joint-ventures and/or outright asset sales;
• The 100% shareholder of 1MDB, the Ministry of Finance, will be involved as relevant and as required in the interests of maximising shareholder value.
1MDB expects to implement these plans over the next twelve months and will provide periodic updates on its progress, said Arul.
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