IPIC fails to make bond payment, but 1MDB says default limited

The cost of insuring Malaysia

KUALA LUMPUR: 1Malaysia Development Bhd has confirmed that the International Petroleum Investment Company (IPIC) has not made a US$50.3mil (RM196.3mil) interest payment on its bonds where it was co-guarantor.

1MDB said on Tuesday however said there is no cross default on its other remaining debt, namely the US$1.75bil 1MDB Energy Ltd notes and the US$3bil 1MDB Global Investments Ltd notes.

It said the interest obligation was required under the terms of a binding term sheet executed on  May 28, 2015, under which IPIC assumed the obligation to pay the interest and ultimately the principal for, amongst others, the US$1.75bil fixed rate 5.75% notes due 2022, issued by 1MDB Energy (Langat) Ltd (Langat notes).

The deadline for the payment was on Monday.

“Accordingly, due to a dispute between the parties, neither 1MDB, nor its subsidiary, 1MDB Energy (Langat) Ltd, have made payment either, and are now in default per the terms of the Langat notes,” the company said in the statement.

1MDB, however, said that the cross defaults were “limited”, noting that they have been triggered on the RM5bil 1MDB sukuk due 2039 and RM2.4bil Bandar Malaysia sukuk due between 2021 and 2024.

“Notwithstanding the dispute with IPIC, 1MDB reiterates that it will meet all of its other existing financial obligations and has ample liquidity to do so," it said.. 

1MDB withheld the interest payment following claims by IPIC that certain payments and other obligations were still owed it.