1Malaysia Development Bhd (1MDB) has been granted another five days to pay US$600 million to an Abu Dhabi state fund after it failed to fulfil its financial obligation originally due on 31 July (Monday), reported Reuters.
In a statement, the Malaysian sovereign fund promised to meet its financial obligation to International Petroleum Investment Company (IPIC) this month, but it didn’t specify a date.
1MDB said it missed making the payment as it needs to get more “regulatory approvals” and it will use the proceeds from the sale and joint development of its assets to pay the amount owed to the Abu Dhabi state fund.
But IPIC’s owner Mubadala Development Company said on Tuesday that Malaysia’s Ministry of Finance and 1MDB only have five days to fulfil their financial obligation.
“Under the settlement, there is a five business day cure period for MOF Inc. and 1MDB to remedy their non-payment before MOF Inc. and 1MDB become subject to additional obligations to IPIC and Aabar.”
In April 2017, after seeking the intervention of the London Court of International Arbitration, 1MDB agreed to pay US$1.2 billion in two instalments in July and December this year to IPIC and its Aabar Investments unit to resolve a debt dispute.
Malaysia’s Finance Ministry also committed to assume responsibility for all future interest and principal payments of two bonds worth a total of US$3.5 billion.
Last year, the Malaysian government dissolved 1MDB’s advisory board and transferred some of its assets, while other were disposed under a rationalisation programme.
Among them is the land for the Bandar Malaysia project, which will house the High-Speed Rail connecting Singapore with Kuala Lumpur. The government initially agreed to sell a 60 percent stake in the property to a consortium consisting of Iskandar Waterfront Holdings (IWH) and China Railway Engineering Corp (CREC) for US$1.72 billion, but the deal was scrapped in May.
According to S&P Global Ratings analyst YeeFarn Phua, the dispute with IPIC is unlikely to affect the sovereign rating of Malaysia at this point.
“That said, failure to reach a settlement between 1MDB and IPIC would increase the possibility of these contingent liabilities crystalizing on the Malaysia government’s balance-sheet. Should that happen, it will worsen Malaysia’s fiscal metrics.”
Image sourced from Mole
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