Why did 1MDB put RM7bn bond redemption in Cayman Islands outfit? (Updated)


Some serious questions are being raised about the proceeds of 1MDB’s RM7bn bond redemption, arising from the disposal of its investment in a joint venture with Petro Saudi International (PSI).

1MDB had disposed of its interest in 1MDB International Holdings Ltd (1MDB-IHL), which had acquired a 49 per cent stake in PetroSaudi Oil Services Ltd (PSOSL), for US$2.3bn.

1MDB then invested the proceeds in shares in a ‘segregated portfolio company’ in Cayman Islands.

The key question being raised in the business press is why place these proceeds outside the country when 1MDB has borrowed so much to finance its acquisition of power assets (from Genting and Ananda Krishnan’s Tanjong Energy) and property within the country. (1MDB, it must be pointed out, was actually set up to draw high-impact foreign investment into projects within the country.)

1MDB’s debt has been growing. Its profits in the financial years 2010 and 2011 were largely due to the revaluation of assets. 1MDB is involved in the Tun Razak Exchange and Bandar Malaysia projects “on land acquired cheaply from the government”.

According to The Edge (1 April), 1MDB’s long-term debts are as follows:

  • Islamic medium-term notes (30 years) RM5bn
  • AmBank term loan RM2.5bn
  • StanChart term loan US$300m
  • 10-year bonds US$1.75bn
  • Financing for Genting Sanyen Power assets RM2.3bn.

Recently, eyebrows were raised when 1MDB CEO Shahrol Azral Halmi was replaced.

Of interest is that The Edge reported that Jho Low, who is close to Najib’s family, was “a key person” in the creation of 1MDB, which morphed from the Terengganu Investment Authority. Low is helping the so-called “1Malaysia Penang Welfare” to organise a “charity concert” in Penang on 20 April featuring imported celebritites.

The Edge also reported that the issuance of the RM5bn in term notes “was handled by AmBank Group but the bulk of the profits went to individuals who placed out the paper in the secondary market for handsome gains”. Who were these individuals?

There’s more to this story, no doubt, but all this is enough for us to pay extra attention to what is happening with 1MDB. After all, some of its bond debts are backed by the government – that’s our money at stake. Improved transparency would help, but don’t count on it.

Update: Jho Low says he is not involved in all this wheeling and dealing:

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26 Feb 2015 12.51pm

People of Malaysia prefer to see and experience
visible transformation in the country rather than investing outside.

24 Apr 2013 12.35pm

Najib must explain allegations that the 1Malaysia Development Bhd (1MDB) had transferred RM7 billion to an account in the Cayman Islands. Transferring huge amount of money to an offshore account runs contrary to the concept of transparency and accountability, which should be practised by a government-linked company!!!

24 Apr 2013 11.48am

1MDB statement today says “these funds for cash management purposes are currently placed under regulated and licensed international fund managers in Cayman Islands based on international standard fund structures.” If the monies raised is for investment in Malaysia, why is it not in our country to improve our reserves? Are there no “regulated and licensed local fund managers in Malaysia? What are you implying 1MDB confidence in our local banks such as Maybank, CIMB, Public Bank and Hong Leong Bank?

najib manaukau
19 Apr 2013 1.06pm

Daily exposure of all the rapscallions’ scandals are been revealed to the public of Malaysia yet Najib is doing nothing about them. It is so obvious Najib is doing that for two important reasons, the first thing is a pot can’t call a kettle black and above all he is just giving them their share of the cake. Wake up Malaysians you just cannot overlook at what is happening, especially with all the … lackeys still offering to stand as coalition partners. Since when have the (their) wishes and desire being even considered in the last few decades. They are… Read more »

semuanya OK kot
semuanya OK kot
19 Apr 2013 12.38pm

This single case is enough to refute the excuses for every form of secrecy behind which the regime hides.