Malaysia's state restructuring outfit to help 1MDB resolve cash-flow problems

PETALING JAYA (THE STAR/ASIA NEWS NETWORK) - Malaysia's finance ministry has asked its in-house restructuring outfit, Prokhas, to help 1Malaysia Development Bhd (1MDB) resolve its cash-flow problems.

The Star newspaper, quoting unnamed sources, said that the outfit was brought in to aid 1MDB, which needs roughly RM5 billion (S$1.86 billion) this year to meet its debt obligations.

"Prokhas has come into the picture, which is why CIMB Investment Bank that was appointed two weeks ago to look into the sale of 1MDB's energy assets has been out of the job," a source told The Star.

The amount due this year is largely to cover the payment of a US$975 million (S$1.3 billion) term loan taken by 1MDB Energy Holdings that is due on Aug 31 this year. At the current exchange rate, the maturing term loan is valued at RM3.55billion.

1MDB Energy Holdings is the energy unit of 1MDB that was supposed to list by the first quarter of this year under the new name of Edra Global Energy. But 1MDB withdrew its proposal on Feb 28 because it could not meet the listing requirements.

"CIMB was roped in to arrange for the sale of Edra Energy, which is about the only asset that can be sold immediately to raise funds for 1MDB to help meet its debt obligations," said a banker.

But its mandate was terminated on April 1 - just a week after the investment bank was appointed.

The other portion of the RM5 billion obligation this year comes from interest cost totalling around RM1.4 billion on all other outstanding loans that 1MDB has taken over the last five years.

Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah had, in his winding-up speech in Parliament on March 25, said that the Government had formed a special task force to look into 1MDB's performance, as well as the debts borne by the firm.

He had earlier in March told Parliament that 1MDB's financial position was "unsustainable" with a cashflow problem.

As it is, 1MDB's total US dollar-denominated borrowings stand at a staggering US$7.5 billion, or RM27 billion, at the current exchange rate.

Based on these outstanding debts, 1MDB's interest payment cost amounts to at least RM1.2 billion a year over the next seven years.

In 2022, the massive US$3 billion bonds taken by 1MDB Global Investment will reach maturity.

1MDB is 100 per cent-owned by the MOF, but unlike other Government-linked investment companies, the ministry has never had board representation in the company.

But as worries about 1MDB's financial obligations are reaching a boiling point, the Government has taken a more active role.

Prokhas is a special project outfit under the MOF and is involved in various corporate restructuring work for the Government. The company was set up in 2005 to take over the role of Danaharta Nasional.