Wednesday, May 13, 2015

Foreign banks circle 1MDB over RM3bil loan

12:59PM May 13, 2015

A group of six international banks are seeking for early payment of their US$975 million (RM3.6 billion) loan to cash-strapped 1Malaysia Development Berhad (1MDB), reports Singapore'sBusiness Times.

The loan from the consortium of banks led by Deutsche Bank is only due in September but it would seem they have become increasingly jittery over 1MDB's financial status.

The report said the banks had initially granted the loan after 1MDB offered its US$1.103 billion as collateral through its unit Brazen Sky Limited in BSI Singapore. The collateral was part of the 1MDB funds previously deposited in the Cayman Islands.

However, the creditor banks now believe that the securitisation documents of the loan to be incomplete and can therefore demand immediate payment.

"What was earlier construed as a tightly collateralised loan is now making the banks nervous, given this controversy,” Business Times quoted an anonymous source as saying.

It said this comes amid questions on whether the said funds parked by 1MDB in Singapore really exist.

Whistle-blower Sarawak Report had last month cited leaked investigation papers, claiming that 1MDB had submitted false bank statements concerning Brazen Sky Limited.

“The account merely contains ‘paper assets', the true value of which cannot be determined," the report had said based on anonymous source.

The Business Times report said 1MDB and the banks are currently in intense negotiations to prevent the early recall of the loan.

Forced to sell assets

Yesterday, PKR's Pandan MP Rafizi Ramli warned that 1MDB, which is already struggling to repay its loan interest, may face a big one in September when the RM3.6 billion loan is due.

However, if jittery foreign banks have it their way, 1MDB may find itself in an even worse position.

1MDB, an entity of the Finance Ministry, has accumulated a staggering RM42 billion and has been forced to begin selling off its assets to try and repay the amount.

However, its sale of assets to other government-linked entities have sparked outrage as it is seen as a bailout of 1MDB which is the brainchild of Prime Minister Najib Abdul Razak, who is also finance minister.

In a related development, 1MDB announced that Indonesia's Mulia Group is purchasing a parcel of the Tun Razak Exchange Land owned by the former for RM665 million to develop the Signature Tower.

The same parcel of land was previously considered by Lembaga Tabung Haji but it later bought a different piece at 1.56 acres,for RM188.5million.

1MDB had purchased the entire 70 acres from the government for a mere RM194.1 million.

This translates to a purchase of RM2,773 per square foot by Tabung Haji, compared to 1MDB which bought the land for only RM64 per square foot from the government.

The pilgrimage fund was later forced to resell the land after itsparked outrage among depositors and within the government's ranks.

~ Malaysiakini

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