Arul Kanda Kandasamy, 1MDB's president and group executive director, was understandably relieved when he released a statement on Monday that the state investment fund had fully paid the US$975 million (RM3.6 billion) it took from a consortium of international banks led by Deutsche Bank.
To recapitulate, 1MDB took the one-year loan to pay Aabar lnvestment (a subsidiary of International Petroleum Investment Company of Abu Dhabi, IPIC) to terminate the “options” granted to IPIC (which are now transferred to Aabar).
IPIC acts as a co-guarantor of the two bonds (each US$1.75 billion) raised by Goldman Sachs and kept a RM4.25 billion as a “security deposit”.
On May 13, 2015 the Business Times of Singapore reported that the lenders, led by Deutsche Bank, had asked 1MDB to settle the loan ahead of the deadline of September 1, 2015.
Arul Kanda was quick to capitalise that the settlement reflected 1MDB's commitment to “reducing its debt”.
Be that as it may... I've pertinent questions for Arul Kanda.
What is the repayment source? Is it coming from Ministry of Finance (more than the credit line of RM900 million) or another loan source to pay off this debt?
If so, at what cost of borrowing? So, where is the commitment to “reduce debt level”...sorry but in a layman's term... don’t bullshit!
Why was there a need to offer the “options” to Aabar (IPIC) in the first place (to subscribe for up to 49% of any future listing of the power assets)?
These options, besides US$393 million or RM1.03 billion paid to Goldman Sachs as fees and commissions, have now become very costly to 1MDB.
The local banking system is flush with liquidity and surely it is cheaper to raise the money here. Were the board of directors informed and was the finance minister as chairman of the advisory board aware of it?
Finally, what was the total amount 1MDB paid Aabar to terminate the options and has IPIC returned the RM4.25 billion “security deposit”?
Arul Kanda, you started off quite well but, in no time, have also suffered serious trust deficit. – June 10, 2015.
* This is the personal opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insider.
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