Federal Govt paying SRC loan until 2022

KUALA LUMPUR: The High Court was told that the Federal Government has to bear a RM4.15bil balance on the principal loan and interest as of May this year from the RM4bil loan taken by SRC International Sdn Bhd in 2012.

To this day, the government is still servicing SRC’s RM4bil loan from the Retirement Fund Inc (KWAP) due to the company’s failure to pay its debt, a witness said.

Finance Ministry strategic investments division deputy secretary Afidah Azwa Abdul Aziz, 44, testified that as the guarantor to the loan, the government must be responsible in paying back the principal loan and its interest to KWAP.

“Based on the agreement between SRC and KWAP, the loan would be settled in 2022, which is 10 years from the year the loan was disbursed in 2012,” she said here yesterday.

The witness was reading from her witness statement at the corruption trial of former prime minister Datuk Seri Najib Razak, who is accused of seven charges relating to misappropriation of RM42mil in SRC funds.

The court also heard that the government had bailed out SRC with close to RM600mil three times to avoid the company from going into an event of default (EOD) with KWAP after it defaulted on its payments.

The witness said SRC stopped making interest payments on the loan in March 2015, resulting in outstanding amounts owed to the pension fund.

According to the financing agreement between SRC and KWAP, the interest payment would begin 30 months from the date of disbursement.

Afidah said KWAP sent out a letter dated Aug 28, 2015 to SRC – which was forwarded to the ministry the next month – to ask for an immediate payment on the outstanding amount for interest on the first RM2bil loan.

“In the event of no payment, KWAP would declare an EOD as allowed by the financing agreement,” she added.

An EOD meant the lender could declare a default. This would effectively end the financing agreement and the lender has the right to claim the full amount of the loan from a guarantor.

With regards to SRC’s loan, this meant the government, which guaranteed the loan, must make the full payment of RM4bil and its interest to KWAP in 30 working days from the declaration of EOD.

To handle the situation, a meeting was held between SRC, KWAP and the ministry and chaired by former Treasury secretary-general Tan Sri Mohd Irwan Siregar Abdullah in September 2015.

Afidah, who attended the meeting, said the ministry was informed that SRC failed to make the payment due to its foreign bank account being frozen.

“The meeting asked for SRC to submit its financial standing and an explanation on why its account in Switzerland was frozen.

“Several letters had been sent and received on this, but no document or information was provided by SRC on these matters,” she added.

In September 2015, KWAP again wrote another letter to SRC asking for payment on the interest for the second RM2bil loan.

However, the witness said SRC did not make the payment but instead asked for the ministry for a short-term loan to pay the outstanding.

In December 2015, the ministry agreed to loan SRC a sum of RM92mil to finance the interest payments for the first RM2bil and the second RM2bil.

In 2016, SRC asked for a second short-term loan to pay its outstanding in interest payment to KWAP.

“The ministry had again agreed to give the government by way of a ‘stand-by credit’ of up to RM250mil to SRC.

“However, to my knowledge, SRC only used RM213mil from the credit amount,” she said.

In 2017, SRC again asked for a loan of RM300mil from the government, this time for profit payment and principal loan.

“At this point in time, SRC’s debt to the government stood at RM304,684,715.40,” she said.

Despite that, Afidah said the ministry agreed to loan the amount.

SRC used about RM290mil from the RM300mil credit, making the total amount RM595mil from all three occasions.

“All three loans approved by the ministry to SRC were paid directly from the ministry to KWAP,” she said.

The hearing before Justice Mohd Nazlan Mohd Ghazali continues today.


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