1MDB has 5 days to settle with IPIC after deadline missed

By FARA AISYAH & MARK RAO

The International Petroleum Investment Co (IPIC) said 1Malaysia Development Bhd (1MDB) has five days to make good a payment of US$602.72 million (RM2.58 billion) or face additional obligations after the Malaysian state investment company missed a deadline yesterday.

After the deadline expired at noon yesterday, IPIC said in a statement to the London Stock Exchange that it did not receive the US$602.72 million and US$26.02 million payments due to be paid by the Minister of Finance Inc (MoF Inc) and 1MDB.

“Under the settlement, there is a five business day cure period for MoF Inc and 1MDB to remedy their non-payment before they become subject to additional obligations to IPIC and Aabar Investments PJS,” the Abu Dhabi sovereign wealth fund said.

1MDB said yesterday that it planned to use proceeds from a debt rationalisation to make payments to IPIC that were agreed by both parties in April, but were delayed by technicalities.

“1MDB itself is awaiting funds that were due to be received in July this year,” the state investment company said in a statement released after the deadline yesterday.

“Due to the need for additional regulatory approvals, the receipt of those funds has been delayed to August 2017.”

1MDB said it has written to IPIC to inform of its commitment to meet the obligations in August instead.

1MDB did not disclose which components of its debt rationalisation plan that were causing the delay, though it recently completed a deal to sell its power assets to China General Nuclear Corp (CGN) for US$2.3 billion cash.

However, it rescinded an earlier deal to sell a stake in the RM200 billion Bandar Malaysia development project.

Both deals were part of its debt rationalisation programme. Meanwhile, the ringgit closed lower against the US dollar yesterday, on the back of news of 1MDB’s failure to make the payment on time. The ringgit declined 0.09% to RM4.2830 against the greenback at 5pm yesterday, com-pared to RM4.2813 on Monday.

Although the ringgit had been on a downtrend since early July, it had seen some improvements last week. It remained stable at RM4.2813 from July 28 to 31, before starting to drop yesterday.

On April 24, 2017, 1MDB and IPIC struck a deal to settle a debt dispute worth US$1.2 billion. Under the settlement terms, IPIC will receive an amount of US$602.72 million by July 31 and a further US$602.72 million by Dec 31.

1MDB and MoF Inc will also assume responsibility for all future interest and principal payments for the two bonds issued by 1MDB Group of Cos that are guaranteed by 1MDB and IPIC — the US$1.75 billion fixed rate 5.75% notes due in 2022 issued by 1MDB Energy (Langat) Ltd and the US$1.75 billion fixed rate 5.99% notes due 2022 issued by 1MDB Energy Ltd.

IPIC sought US$6.5 billion from 1MDB over the failure to honour their debt obligations for the bonds, before going to the London Court of International Arbitration to resolve the issue.