Abu Dhabi fund seeking $8.8b from 1MDB

A construction worker walks past a 1MDB billboard at the Tun Razak Exchange development in Kuala Lumpur, Malaysia on February 3.
A construction worker walks past a 1MDB billboard at the Tun Razak Exchange development in Kuala Lumpur, Malaysia on February 3. PHOTO: REUTERS

KUALA LUMPUR • Abu Dhabi's sovereign wealth fund, embroiled in a debt payment row with 1Malaysia Development Berhad, is seeking US$6.5 billion (S$8.8 billion) from the troubled investment firm as it moves the spat into arbitration.

1MDB and its sole shareholder - Malaysia's Ministry of Finance (MOF) - have not performed their obligations towards International Petroleum Investment Co (IPIC), the Abu Dhabi fund said in a London stock exchange filing yesterday. IPIC and its unit Aabar Investments submitted the request to the London Court of International Arbitration, it said.

"The failure of 1MDB and MOF to perform their obligations, cure their defaults or put forward acceptable proposals, has left IPIC in the position where it must pursue its claims in arbitration," IPIC said.

1MDB said in response that it would review the request for arbitration once it has been served with a copy.

Under a deal, IPIC agreed to loan US$1 billion to 1MDB and assume payments on US$3.5 billion of 1MDB debt. It also forgave an undisclosed amount of debt that 1MDB owed IPIC, in exchange for assets which have not been identified. But IPIC said in April that 1MDB was in default of that agreement, after the Malaysian fund failed to repay the loan.

1MDB subsequently defaulted on interest payments on two bonds, which IPIC had guaranteed. The Malaysian fund said it has sufficient funds to make the interest payments but did not due to its dispute with IPIC.

The Finance Ministry did not immediately comment.

IPIC is claiming the US$3.5 billion bond plus interest that amounts to US$4.8 billion, the US$1.2 billion loan plus interest, and about US$481 million owed to Aabar - adding up to $6.5 billion, a person familiar with the matter told Reuters.

1MDB, once a pet project of Prime Minister Najib Razak, is the subject of money-laundering probes in at least six countries. 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.

BLOOMBERG, REUTERS

A version of this article appeared in the print edition of The Straits Times on June 15, 2016, with the headline 'Abu Dhabi fund seeking $8.8b from 1MDB'. Print Edition | Subscribe