By Khairul Khalid
1Malaysia Development Bhd (1MDB) says there will be a reduction of up to RM16 billion in its debts through its debt settlement arrangement with the International Petroleum Investment Co (IPIC) of Abu Dhabi.
“The transaction will, upon completion, result in a reduction of up to approximately RM16 billion from 1MDB’s debt levels. This demonstrates the success of 1MDB’s rationalisation plan, which is also reflected by the strong domestic and international investor interest in Edra Energy and Bandar Malaysia, symbolising the value 1MDB has built up in these assets over time,” said 1MDB in a statement.
1MDB also said that this transaction conclusively puts to rest the false claims concerning the relationship between the two companies that had been alleged by opposition leader Tony Pua and published by The Business Times.
“1MDB trusts that with this conclusive evidence, all third parties with no involvement in the ongoing 1MDB rationalisation plan will now cease making unfounded allegations with respect to its implementation,” said 1MDB.
Earlier today, IPIC announced that it will pay the interest payments due in October and November 2015 amounting to US$102.7 million (RM431.26 million) with regards to two US$1.75 billion bonds issued by 1MDB Energy Ltd and 1MDB Energy (Langat) Ltd and co-guaranteed by IPIC.
This is pursuant to the binding term sheet and as previously disclosed to the London Stock Exchange, said IPIC in an update on the agreement between the firm and Aabar Investments PJS (Aabar) and 1Malaysia Development Bhd (1MDB) and the Malaysian Finance Ministry on May 28, 2015.
“The transaction will see IPIC assume obligation for a US$3.5 billion bond principal and interest, currently held by 1MDB, and follows a US$1 billion cash payment made by IPIC to 1MDB in June 2015.
“IPIC’s assumption of these obligations will be satisfied through an exchange of assets, provided by 1MDB, partly the company’s US dollar-denominated cash deposits and partly its US dollar funds under management – either in cash or in fund units – upon mutual agreement with IPIC,” said 1MDB.
In June 4, 2015, IPIC provided US$1 billion to 1MDB to to settle a portion of its liabilities (the cash payment) and from June 5, 2015, IPIC has assumed 1MDB’s obligations to pay (on an interim basis) all interest due under the notes amounting to US$3.5 billion in aggregate principal amount.
Upon the completion of the transfer of assets, IPIC will directly assume liability for all payment obligations under the notes (the assumption of debt) and forgive certain financial obligations of the 1MDB group to the IPIC group (the debt forgiveness).
Accordingly, by June 30, 2016, IPIC is to have received a transfer of assets with an aggregate value of an amount which represents the sum of the cash payment, the assumption of debt and the debt forgiveness.
IPIC was formed in 1984 by the Abu Dhabi government to diversify the country’s economy and invest in energy related sectors worldwide.
Today it manages a portfolio of investments in more than 18 companies across the hydrocarbon value chain, including exploration and production, shipping and pipelines, downstream retail and marketing, petrochemicals, power and utilities as well as industrial services, according to its website.
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