1MDB pays Abu Dhabi fund $477m ahead of deadline

But larger-than-required sum remitted in first tranche of debt repayment raises questions

KUALA LUMPUR • Malaysia's state fund 1Malaysia Development Berhad (1MDB) has paid US$350 million (S$477 million) to Abu Dhabi's International Petroleum Investment Company (IPIC), the first tranche of a debt repayment scheme.

The payment to the Abu Dhabi sovereign fund was made ahead of the deadline and was more than the US$310 million it was required to pay under the scheme.

"1MDB has now remitted, to date, the equivalent of US$350 million to IPIC," the state fund said in a statement yesterday. "All funds paid to IPIC are from proceeds of the ongoing rationalisation programme."

The debt-laden state fund had missed a July 31 deadline and a five-day extension to repay IPIC, and was given an extra week until today to pay US$310 million.

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"The balance of the original July 31, 2017 payment obligation to IPIC is accordingly now due on Aug 31, 2017," 1MDB said.

The payment comes as the United States intensifies a criminal investigation into money allegedly diverted from the state fund into luxury real estate, art and film productions.

Bloomberg reported that court filings by the Department of Justice on Thursday showed the US was escalating its probe in a global effort to uncover the amount of 1MDB funds that was allegedly misappropriated.

ENTITLED TO KNOW

Malaysians are entitled to know whether the difference of US$40 million was the 'default interest' which 1MDB had to pay as a penalty for failing to (meet) the original July 31 deadline and a five-day extension for the first tranche.

MR LIM KIT SIANG, Malaysian opposition leader, on whether the extra funds paid by 1MDB to IPIC were an interest payment.

The department had asked a judge in Los Angeles to put on hold civil forfeiture lawsuits against assets acquired by Malaysian financier Low Taek Jho, also known as Jho Low, and others involved with 1MDB as pursuing these cases may hamper the criminal investigation, reported Bloomberg.

Mr Low, whose whereabouts are not known, has denied accusations of wrongdoing.

The payment to IPIC was the first of two payments totalling US$1.2 billion due to IPIC before the end of the year, according to the terms of the private arbitration in April in London.

Under the deal, 1MDB and the Malaysian Finance Ministry also assumed responsibility for all future interest and principal payments under two bonds, worth US$3.5 billion in total, according to The Malaysian Insight news site.

Missed payments by 1MDB are a concern for foreign investors, who own a significant share of government bonds in the South-east Asian nation. Allegations of fraud involving 1MDB have already spooked investors by weighing on Malaysia's currency.

A Malaysian opposition leader, Mr Lim Kit Siang, asked yesterday whether the extra funds paid by 1MDB to IPIC were actually an interest payment.

"Malaysians are entitled to know whether the difference of US$40 million was the 'default interest' which 1MDB had to pay as a penalty for failing to (meet) the original July 31 deadline and a five-day extension for the first tranche," he said in a statement.

1MDB was started by Prime Minister Najib Razak in 2009 soon after he became Malaysia's leader. He has been battling allegations that money from the fund had been stolen by him and his associates.

Last year, he was cleared of any wrongdoing in the 1MDB scandal by Malaysia's Attorney-General.

The Malaysian leader admitted there were "lapses in governance" in the state fund, but maintained that government investigations found no wrongdoing, and that 1MDB is undergoing rationalisation to rid itself of its heavy debts.

A version of this article appeared in the print edition of The Straits Times on August 12, 2017, with the headline '1MDB pays Abu Dhabi fund $477m ahead of deadline'. Print Edition | Subscribe