1MDB unable to disclose details on loan report

PETALING JAYA: 1Malaysia Development Bhd (1MDB) was unable to disclose any details on news that a consortium of banks led by Deutsche Bank has asked for a US$975mil (RM3.5bil) loan to be repaid less than four months ahead of its due date.

“We are aware of recent press reports and statements concerning a loan taken by 1MDB in September 2014. While we would like to respond in detail, this relates to a confidential banking matter, which prevents us from commenting at the present time,” said its president and group executive director Arul Kanda Kandasamy in an email reply.

“However, we intend to update the market as soon as we are in a position to do so.”

A report by Singapore Business Times yesterday said the loan, which was syndicated to five Gulf banks including Abu Dhabi Commercial Bank, is guaranteed by the Malaysian government.

The money from the US$975mil loan was used by 1MDB 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 Global Energy, the report said.

The lenders are said to be jittery after doubts surfaced over the collateral of the loan. The US$975mil loan was secured with 1MDB’s wholly owned Brazen Sky’s US$1.103bil. The report said that money by Brazen Sky was being kept at Swiss private bank BSI Singapore.

The report, quoting sources, said the “securitisation document” for the loan had now been deemed “incomplete”, as one of the covenants was not fulfilled.

The non-fulfilment of the covenants allows lenders to demand payment on the loan anytime before it becomes due at the end of August, according to the report.

“What was earlier construed as a tightly collateralised loan is now making the banks nervous, given this controversy,” said a source, according to the report.

Should the lenders call a default of the loan, 1MDB, which is facing cash flow problems, could be faced with a situation of a cross default on the rest of its debts of RM42bil.

The report said the parties involved in the loan were believed to be locked in intense negotiations to avert such a crisis involving the loan.