Samurai bond issue frees up means to pay 1MDB debts

Proceeds from the bond issuances will be used for development and infrastructure projects outlined in Budget 2019


The ¥200 billion, or RM7.34 billion, raised from the Samurai bond issue will enable Putrajaya to pay debts linked to 1Malaysia Development Bhd (1MDB) as federal revenue sources expand.

Finance Minister Lim Guan Eng said the proceeds from the 10-year Samurai bond will be used to fund development and infrastructure projects as outlined in Budget 2019 and give some room for the government to meet its financial commitments in 1MDB.

“When we have funding for development projects, it frees up other sources of revenue to pay debts at 1MDB,” Lim said at a press conference in Putrajaya yesterday, in conjunction with the completion of the Samurai bond issuance.

As at October 2018, the government was reported to have paid some RM1.69 billion in interest on 1MDB loans for the year alone, including US$50.3 million (RM206.23 million) interest for bonds issued by 1MDB Energy (Langat) Ltd, a whollyowned subsidiary of the cashstrapped state investment arm.

Lim had previously said the government has no intention to default on any of its international debt obligations under 1MDB to maintain Malaysia’s sovereign credit rating.

The government successfully issued the 10-year ¥200 billion Samurai bond last Friday, marking its return to the yen bond market after a 30-year hiatus. The last issuance was in 1989.

The Samurai bond was oversubscribed by 1.6 times and has the lowest rate in Asean with an overall cost to the government at 0.63% per annum, lower than its initial projection of 0.65%.

“The Samurai spirit is still alive in Japan and the spirit is to help whoever and whenever it is, as long as there is a genuine objective. We believe Malaysia and its government is moving towards a right direction in reducing debt and cleaning up the dust,” the Japanese Ambassador to Malaysia Dr Makio Miyagawa said.

The debt papers are guaranteed by the Japan Bank for International Cooperation (JBIC) and is the largest JBIC-guaranteed sovereign bond issuance in the yen-denominated bond market.

The landmark transaction is also the first JBIC guarantee accepted by the Malaysian government.

Meanwhile, Lim said the Finance Ministry has approved a RM3 million allocation to the Domestic Trade and Consumer Affairs Ministry (KPDNHEP) to provide 14 lorries for the Foodbank Malaysia programme.

KPDNHEP Minister Datuk Seri Saifuddin Nasution Ismail said the programme has garnered participation from 430 supermarkets nationwide and food distribution will be made at 20 public universities for students coming from B40 families.

The Foodbank Malaysia programme was started at Universiti Kebangsaan Malaysia on Feb 26 and at Universiti Malaya on March 7.

It will be rolled out to universities such as Universiti Malaysia Pahang, Universiti Sains Malaysia, Universiti Malaysia Sabah and other institutions of higher learning according to schedule.

Tesco Stores (M) Sdn Bhd, GCH Retail (M) Sdn Bhd of Giant hypermarkets and AEON Co (M) Bhd are among the participating supermarket chains in the programme.