The spotlight continues to shine on 1MDB and its operations, as its rapid build-up of debt raises eyebrows: it reportedly has US$12bn in borrowings – although some argue that these are backed by assets of RM38bn.
Questions about the US$2.3bn “re-invested” in a company in the Cayman Islands continue to buzz. This was a peculiar transaction: some have wondered why 1MDB did not bring back to Malaysia the RM2.3bn proceeds from the disposal of its original US$1bn investment in 1MDB PetroSaudi Ltd. That money could have been used to finance 1MDB’s local needs.
The debt profile of 1MDB is reportedly summarised as follows:
Borrowings at end-March 2012: US$2.4bn
Purchase of Tanjung Energy power assets: US$3.7bn
Purchase of Genting Sanyen power assets: US$1.8bn
10-year bond for “strategic partnership” with Abu Dhabi: US$3.0bn
Other loans: US$1.1bn
Total loans: US$12.0bn
About half of these are bonds structured and underwritten by Goldman Sachs. That makes it the largest underwriter in Malaysia. The coupon rates for these deals have also come under scrutiny. So too the pricing of the purchase of the power assets.
See the full report in The Edge.
What makes it more of concern is that the 1MDB borrowings are apparently not included in the federal government debt level of 53.3 per cent of GDP, which is just below the permissible threshold of 55 per cent.