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.
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While the people still argue over a submarine deal that only cost single-digit billions, Bolehland has progressed to the next level, e.g. double-tracking, purchase of IPPs, MRT.
Many did not know that MPSP or the Seberang Council was nearly bankrupt prior to 2008 until PR take over
dEAR anil THIS INFO SHOULD BE GIVEN PROMINANCE IN THE ALIRAN. BN WILL CONTINUE TO BORROW AND MAKE THE COUNTRY BANKRUPT BEFORE THEY LEAVE; IT IS UP TO THE PAKATAN MPS MANY OF THEM NOT FIT FOR THE JOB – FIGHT IT OUT AND WALK OUT FROM PARLIAMENT. LET THE WORLD KNOW. MAKE THE WORLD KNOW WHAT THE BN IS DOING. NOT ONLY THIS ISSUE, THERE ARE OTHER IMPORTANT ISSUES AS WELL. 1. death in police custody; 2 bail system is rotten; 3 workers minimum wages – no solution yet; 4 prison overcrowded – very soon there will be a… Read more »
Ex PM Abdullah Badawi says Malaysia will go bankrupt if he listen to Mahathir…..Idris Jala says Malaysia will go bankrupt in 2018 if we do not control our spending. If Detroit city can go bankrupt what is so surprising that Malaysia go bankrupt?
1malaysia is well equipped to deal with bankruptcy with is website and Q&A:
Very proactive indeed as bankruptcy is a clear and present danger for rakyat and the nation.
The line “backed by assets” is the worst reason one can come up for borrowing..You borrow basically because you can get returns and cash back to pay back the loan. You don’t borrow because you are rich..Rich people stay rich by NOT borrowing when they don’t very have good reason for it.. If you have lots of asset and you borrow without thinking of cash flow to pay back the debt, what happens is that usually the cash never shows up as you expected and you have to sell assets at deep discount and lose money. So if they don’t… Read more »
The big question how much in return disappear into Political Trader pockets.
rajraman.Umno leaving mountains of debt for the tax payer.
Just one quick and simple question, why do you or anyone needs to borrow ? And don’t try to confuse and complicate the entire issue with all sort of figures and arguments with complicated figures. You need to borrow only when you are in need or when you are in deficit, period. Why is Singapore just a stone throw across the causeway who has nothing, I repeat who has nothing, no natural resources whatsoever and now has trillion of ringgits. All the Umno warlords even repeatedly threatening them to disconnect the water Malaysia were supplying them with. Every time when… Read more »
1MDB is dubious by its shoddy operations.
Thanks to Anil for the article.
I hope this is not another of that RENONG saga which the ex-CEO(Halim Saad) is now trying to claim from the govt.