Ringgit Jatuh, 1MDB Tenggelam Lagi

This is from The Edge Financial Daily

Weak ringgit weighs on 1MDB

Sovereign fund’s debt burden will grow by RM3.96b because of the softer currency
 

KUALA LUMPUR: The recent sharp depreciation of the ringgit will not augur well for 1Malaysia Development Bhd (1MDB), which has US dollar-denominated debt of US$7.4 billion (RM25.7 billion).
 

1MDB had US-dollar loans of about RM22.25 billion according to the sovereign fund’s financial statements for the financial year ended March 31, 2014 (FY14), more than half of its RM42 billion in debts. 

ringgit has declined by 6.5% in the past nine months to 3.48 against the greenback

the same US$7.4 billion in debts have ballooned to about RM25.7 billion — an increase of about RM3.96 billion.
 

This means that 1MDB would incur an unrealised foreign exchange loss of RM3.96 billion, 

exerting more pressure on the fund to meet its debt obligations if the ringgit stays depressed.
 

Even when the ringgit was averaging at between 3.00 and 3.20 against the US dollar in FY14, 1MDB’s finance costs were already a whopping RM2.4 billion, resulting in a cash flow deficit of RM2.25 billion.

1MDB’s assets are not generating enough cash flow to service its debts. 

the sovereign fund, which posted a net loss of RM665.3 million for FY14, has kept issuing debt papers to raise fresh capital to meet its debt obligations and fund asset acquisitions.
 

money sent to Cayman Islands is being managed by Hong Kong-based Bridge partners.

It doesn’t help that 1MDB is paying a relatively high coupon rate for its US dollar bonds 

lenders priced in the foreign exchange risk, exacerbating even more pressure on the sovereign fund. 

In a nutshell, 1MDB seems to have a mismatch between its earnings/cash flow and debt obligations.

raises the question why 1MDB raised funds offshore in- stead of considering that most of its assets acquired, for instance power plants and land, are at home?

It seems that since 1MDB was set up, the sovereign fund has been busy jiggering its balance sheet to meet debt obligations. 

Is that the rationale of setting up the sovereign fund? 

If not, what are the social or economic benefits that the public can expect from it?

My comments : The clueless Prime Minister is too st*pid to understand all this.  The stuff is hitting the fan already.