Abu Dhabi to inject RM3.6bil lifeline

KUALA LUMPUR: Debt-laden 1Malaysia Development Bhd has received a lifeline of US$1bil (RM3.6bil) from Abu Dhabi’s energy investment arm to repay its loan to a syndicate of international banks.

The US$1bil would come from the International Petroleum Investment Company (IPIC), which had entered into an agreement with 1MDB, along with its subsidiary Aabar Investments.

“As part of this agreement, IPIC will make a payment of US$1bil on or before June 4.

“This will be used to repay a US$975mil (RM3.5bil) loan before its due date to international bank lenders,” Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah said in a statement yesterday.

1MDB has debts of RM42bil and the consortium of banks led by Deutsche Bank had asked for the US$975mil loan to be repaid less than four months earlier than its due date on Aug 31.

1MDB used the US$975mil loan to pay Abu Dhabi’s IPIC to terminate an option to subscribe for the future listing of 1MDB’s power asset, Edra Energy.

StarBiz had reported that if the lenders called a default of the loan, 1MDB could be faced with a situation of a cross-default on the rest of its debts.

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

The US$975mil was secured with 1MDB’s wholly owned Brazen Sky’s US$1.103bil (RM4.02bil).

Earlier, IPIC guaranteed US-dollar debt papers of US$3.5bil (RM12.7bil) to facilitate 1MDB’s purchase of power plants from Tanjong and Genting.

In return for the corporate guarantee from IPIC, 1MDB had given a 10-year option to Aabar Investments to acquire up to a 49% equity interest in the Tanjong and Genting power plants.

Husni said the binding agreement with IPIC would include other measures to address the various financial asset and liability transactions between the parties.

The minister, who presented 1MDB’s rationalisation plan to the Cabinet earlier yesterday, described the agreement as “a significant step” towards reducing its overall debt levels.

“This agreement is a crucial part of the rationalisation plan I presented to Cabinet, which we expect to be implemented in full by early next year.”

He said the rationalisation of 1MDB followed the conclusion of the strategic review, as announced in February, under which the Tun Razak Exchange and Bandar Malaysia would be set up as stand-alone companies with full autonomy and accountability for their operational and financial performance.

“While options are being pursued with respect to the monetisation of Edra Energy, the Ministry of Finance will remain a key shareholder in TRX and Bandar Malaysia, which will raise equity via third-party investors. Proceeds raised will be used for capital expenditure and reduction of 1MDB’s debt,” said Husni.