Goldman struggles for deals in Malaysia following 1MDB controversy

The Goldman Sachs booth on the floor of the New York Stock Exchange.
The Goldman Sachs booth on the floor of the New York Stock Exchange. PHOTO: EPA

KUALA LUMPUR • Fees from work in Malaysia have slumped for investment bank Goldman Sachs amid furore over debts racked up by state fund 1MDB which the bank helped finance, the Financial Times has reported.

The newspaper stated analysis of data from financial software firm Dealogic in its report.

Goldman had pocketed nearly US$300 million for its 2013 role in arranging a US$3 billion bond for 1Malaysia Development Berhad - the fund which is being probed on how it borrowed $11bn apparently without sufficient assets to support this debt.

Goldman's involvement is in the spotlight once more because of the proximity of the bond issuance to alleged payments of almost US$700m from the fund to Malaysian prime minister Najib Razak weeks before a general election, the FT report said.

Mr Najib has denied taking money for personal gain, and no one has produced evidence of any link between the payments and Goldman.

However, the bank's subsequent struggles underline the prizes and pitfalls for investment bankers striving to build relationships with governments and tycoons in Asia, FT report said.

"If you're a Malaysian corporate, you're not going to use Goldman because you don't want this association," one rival banker told the newspaper about the unofficial shunning of the bank.

Goldman was the only western investment bank to feature among the top 10 fee-earners in Malaysia between 2008 to 2013 under its Southeast Asia chairman Tim Leissner.

But, business in the country suffered after the 2013 deal, in which it bought US$3bn of 10-year bonds for US$2.7bn from 1MDB. Its profit was to be the difference between the price it paid and what it could sell the bonds for.

Since that year, though, when it ranked seventh, Goldman slid to 23rd in 2014. It does not yet appear in Dealogic's fee calculations for 2015, FT reported.

Prices on the 2013 bonds fell as low as 80 per cent of face value earlier this month, but have since rebounded to 86.5 per cent.

But all is not lost for Goldman. Several clients were confident the damage from 1MDB scandal will blow over.

"The wise thing will be to wait it out and see where any wrongdoing was - until then, it's immature to end a business relationship based on hearsay," one chief executive who plans to continue working with Goldman told FT.

Nevertheless, the bank has not done a public deal in the stock or bond markets since 2013, and has advised Malaysian groups on just four mergers in the past two years - lowering it to eighth in the country's deals league table.

"Malaysia has and continues to be an important part of our Asian business", said the bank. We have a very positive dialogue with Malaysian clients and an active deal pipeline."