Raja Shahreen Raja Othman, who is currently the CEO of Selangor
KUALA LUMPUR: The previous government’s redemption of a RM1.2bil debt paper issued to Khazanah Nasional Bhd in August last year is one of the rare occasions where it demanded for cash from its investments in the Malaysian sovereign wealth fund.
Apart from the payment of RM1.2bil last August, the government also redeemed RM1.8bil of a RM3bil Redeemable Convertible Cumulative Preference (RCCPS) on March 14, 2014.
Khazanah has issued the RCCPS to its sole shareholder on March 7, 2011.
A wire report stated that the government then used the proceeds of the redemption of the RM1.2bil RCCPS to settle some liabilities that 1Malaysia Development Bhd owed the Abu Dhabi-based International Petroleum Investment Corp (IPIC).
Coincidentally, 1MDB settled its obligations to IPIC in August last year. Also, 1MDB’s financial close is on March 31, which happens to be the time when MoF redeemed the first tranch of the RM3bil RCCPS.
Sources say that apart from the annual dividends, the only cash payment that the government gets from Khazanah is the annual dividends of RM1bil or in some occasions RM2bil.
“Most of the other liabilities between Khazanah and the government are set off by payment in kind. For instance the government sold the land in Singapore to Khazanah. It was set off by liabilities that the government owes Khazanah.
Khazanah, which is wholly owned by the Ministry of Finance, undertakes several initiatives on behalf of the government and any payments due are normally settled in kind. For instance Khazanah spent more than RM5bil in Malaysia Airlines staff rationalisation scheme.
It was supposed to get RM6bil from the government in its efforts to resuscitate MAS. Sources said this amount has yet to come from the government.
Sources said that the redemption of the RCCPS and the demand for payment in cash were the first time that there was an actual cash transaction apart from the annual dividend payment.
In April 2017, 1MDB, the financially troubled government fund that is the subject of a massive investigation by the Pakatan Harapan government, reached a settlement with IPIC after it defaulted on a bond obligation.
The 1MDB default caused IPIC to file for arbitration from a court in London claiming US$6.5bil. This forced 1MDB and the MoF to seek a settlement with IPIC which resulted in the Malaysian entities obliged to pay IPIC US$1.2bil in two payments by December 31, 2017.
1MDB made the first payment of US$600mil in August last year, missing the deadline of July 31.
The final payment of US$600mil was made on Dec 27.
It has been reported that some of the proceeds from the government’s sale of land to Bank Negara that amounted to RM2bil last year was diverted towards the settlement of the IPIC obligation.
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