By BLOOMBERG
Najib Abdul Razak
1Malaysia Development Bhd (1MDB) will trim its debt by RM40.4 billion once it completes agreed asset sales, Prime Minister Najib Abdul Razak said on Thursday after the state-owned fund announced its latest asset disposal pact.
1MDB said on earlier Thursday it would sell a 60% stake in a Kuala Lumpur project known as Bandar Malaysia to a joint venture between Iskandar Waterfront Holdings Sdn Bhd and China Railway Construction Corp for RM7.41 billion.
The disposal is part of a broader plan the company announced in February to unwind its assets after drawing criticism from lawmakers for amassing about RM42 billion of debt in its less than five years of existence.
“1MDB’s major challenges are now behind it,” said Najib, who heads the fund’s advisory board, in an emailed statement. “All that remains is for the deals it has entered into to be completed and the final steps of 1MDB’s rationalisation programme to complete.”
Under scrutiny
The Kuala Lumpur-based company, which had total debt of US$9.8 billion (RM42 billion) as of March 2014, came under scrutiny after it almost defaulted on a loan earlier this year and threatened the sovereign’s credit rating.
It faced cash flow problems and a planned initial public offering of its energy unit was delayed amid unfavourable market conditions, president Arul Kanda said on Oct 31.
The listing was cancelled, and the company agreed to sell the assets to China General Nuclear Power Corp for RM9.83 billion in November.
Bandar Malaysia, a mixed-property project encompassing a 196.7ha site, is valued at RM12.4 billion, according to the investment company. The development will also host terminals for the Singapore-Kuala Lumpur high-speed rail and offer future access to major highway networks. The project will be developed over 15 to 25 years at an estimated sale value of RM150 billion.
Besides the assets sales, 1MDB has also entered into an agreement with International Petroleum Investment Co for the Abu Dhabi company to assume its obligation for a US$3.5 billion bond, including principal and interest, according to Dec 17 statement.
1MDB has also been the subject of investigations related to allegations of financial irregularities, although an initial auditor-general’s report didn’t reveal any suspicious activity. Najib has resisted calls from former prime minister Dr Mahathir Mohamad to step down over the fund’s performance.
“The sales will resolve 1MDB’s financial issue,” said James Lau, a Kuala Lumpur-based investment director at Pheim Asset Management Asia Bhd, which oversees US$300 million. “But the bigger issue has always been accountability and transparency.”
— By Elffie Chew
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