1MDB agrees to IPIC's request for arbitration

KUALA LUMPUR • Malaysian state-owned fund 1Malaysia Development Berhad (1MDB) yesterday said it had agreed to a request for arbitration filed by Abu Dhabi's International Petroleum Investment Company (IPIC) and its subsidiary, Aabar Investments.

IPIC, in a submission to the London Court of International Arbitration last month, is claiming about US$6.5 billion (S$8.8 billion) from 1MDB and Malaysia's finance ministry after a debt restructuring agreement between the companies went sour.

"1MDB is confident in its legal position and has submitted a formal and robust response to the RFA (request for arbitration) through its legal counsel, Weil Gotshal & Manges, a specialist in international litigation," 1MDB said in a statement.

1MDB had signed a deal with IPIC in May last year, with IPIC agreeing to lend US$1 billion to 1MDB and assume payments on US$3.5 billion of the Malaysian fund's debt.

IPIC also forgave an undisclosed amount of debt that 1MDB owed IPIC, in exchange for assets which have not been identified.

Problems began when the Abu Dhabi fund denied it owned Aabar Investments, a British Virgin Islands company which received payments from 1MDB meant for IPIC. These fund transfers are now under the scrutiny of global investigators.

IPIC said in April that 1MDB was in default of that agreement after 1MDB failed to repay the loan, following which it subsequently defaulted on interest payments on two bonds, which IPIC had guaranteed.

IPIC is claiming the US$3.5 billion bond plus interest that amounts to US$4.8 billion, the US$1 billion loan plus interest, and about US$481 million owed to Aabar - adding up to about US$6.5 billion.

1MDB is the subject of money- laundering probes in at least six countries.

REUTERS

A version of this article appeared in the print edition of The Straits Times on July 12, 2016, with the headline '1MDB agrees to IPIC's request for arbitration'. Print Edition | Subscribe