1Malaysia Development Berhad’s (1MDB) is set to be liquidated, with its remaining valuable assets, including huge parcels of land, to be handed over to other entities.
The state investment firm, which was established by Prime Minister Najib in 2009, is now being dissolved following allegations that its funds were used for personal reasons by the premier and his close associates, resulting in 1MDB’s debts peaking to US$12 billion (RM53.67 billion) at one point.
Based on a plan being directed by a top-level government unit created last April known as the Budiman committee, 1MDB’s assets will be carved out and transferred to firms under the Finance Ministry over the next few months.
These prized assets consist of a large land parcel in Penang island and two enormous plots in Kuala Lumpur. These three properties will be handed over to Aroma Teraju and Piramid Pertama, said lawyers and government officials involved in the debt restructuring exercise.
Second Finance Minister Johari Abdul Ghani, who leads the Budiman committee, recently told The Straits Times that the sale of 1MDB’s power plants under Edra Energy to a Chinese firm for RM17 billion had helped settle debts owed to Malaysian lenders.
“Our next move is to kick-start the property development of Bandar Malaysia and TRX,” he said, referring to 1MDB’s two major property development on the outskirts of the capital.
The 197ha Bandar Malaysia, a future township being constructed on Kuala Lumpur’s fringe, will house the terminus of the Singapore-KL high-speed rail (HSR). 40 percent of this development owned by 1MDB and 60 percent is held by a Malaysian-Chinese consortium.
Besides the 28ha Tun Razak Exchange (TRX), which is envisioned to be the new financial district in the capital, 1MDB’s other valuable asset is a 94.7ha land parcel in Penang’s Air Itam district.
At present, 1MDB’s debt load stands at around US$4.78 billion, down from its height of US$12 billion (RM53.67 billion) after it sold its power plants last November.
“The resolution of 1MDB’s debt obligations will be carried out separately by the government,” said a senior government official privy to the matter.
However, officials and financial executives said the debt restructuring will face many challenges, one of which is getting the approval of 1MDB’s creditors and bond holders.
To get their support, the Malaysian federal government must guarantee that it will repay all of 1MDB’s loans and bonds upon its liquidation, added officials and bankers.
Meanwhile, 1MDB is involved in tussle with two Abu Dhabi state-owned companies, which are demanding US$6.48 billion (RM28.98 billion) for direct loans extended to the Malaysian entity, along with financial guarantees both granted on a bond issue.
The state investment firm’s debt profile is complicated, said an attorney with knowledge of the matter. “Some (of the debt comes with) outright guarantees, some are with letters of comfort and letters of support.”
Image sourced from Free Malaysia Today
Diane Foo Eu Lynn, Senior Content Specialist at PropertyGuru, edited this story. To contact her about this or other stories email diane@propertyguru.com.my
