Lenders led by Deutsche Bank seek early repayment from 1MDB: Report

KUALA LUMPUR: A consortium of banks led by Deutsche Bank has asked for their US$975mil loan to be repaid by 1Malaysia Development Bhd (1MDB) less than four months earlier ahead of its due date, a report by Singapore Business Times said.

The loan, which was syndicated to five Gulf banks including Abu Dhabi Commercial Bank, is guaranteed by the Malaysian Government.

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 by Singapore Business Times said that money by Brazen Sky is said to have been kept at Swiss private bank BSI Singapore.

The report, quoting sources, said the “securitisation document” for the loan has now been deemed “incomplete”, as one of the covenants was allegedly 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, said 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 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 are believed to be locked in intense negotiations to avert such a crisis involving the loan.

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 Energy, the report said.