Malaysian state fund 1MDb fails to repay RM 2 billion loan, chief executive replaced: reports

Debt-laden state investment company 1Malaysia Development Bhd (1MDB) has failed for a second time to pay a RM2 billion (S$750 million) loan to local lenders due on December 31 last year, The Edge Financial Daily reported on Tuesday.

It quoted sources as saying 1MDB has now been given until January 30 to settle the debt that was originally due on November 30, 2014. Malayan Banking Bhd (Maybank) and RHB Bank Bhd are the lead lenders.

The Edge reported that the problem has been brought to the attention of Bank Negara Malaysia and sources said at a recent meeting, top executives from 1MDB led by chairman Lodin Wok Kamaruddin, director Ismee Ismail and outgoing chief executive officer Mohd Hazem Abdul Rahman were given a dressing-down by the central bank and told to settle the matter or face action.

1MDB announced on Monday that Malaysian-born, Dubai-based banker, Arul Kanda Kandasamy, 38, will become its third chief executive in the space of just over five years.

The RM2 billion loan is part of a RM5.5 billion debt taken through 1MDB's subsidiary Powertek Investment Holdings last May to refinance a RM6.17 billion bridging loan taken in 2012 to part finance the purchase of power assets.

The remaining RM3.5 billion has been converted into a 10-year term loan due in August 2024.

The Edge quoted sources as saying that 1MDB could be struggling with cash flow as it has not received the RM4.3 billion that was supposed to be redeemed from an investment in a Cayman Islands fund on November 30 last year.

1MDB's plan to list its energy assets to raise money to pay its debts has also been delayed, likely to the second quarter of this year.

1MDB had borrowings of RM42 billion and suffered a negative cash flow of RM2.25 billion in financial year 2014 with its debt servicing at around RM2.5 billion, said the Edge.

It quoted sources as saying Bank Negara is paying special attention to the 1MDB issue because the sliding ringgit has aggravate its debt servicing as the fund's income is almost all in ringgit.