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Monday, January 12, 2015

1MDB more reckless than responsible, says Pua

Tony Pua says if 1MDB was “responsible” like its new president Arul Kanda says, it would not be in its current financial predicament.
arul kandasamy tony pua2PETALING JAYA: DAP National Publicity Secretary Tony Pua rubbished the claims of 1 Malaysia Development Berhad’s new president Arul Kanda Kandasamy, who defended it as a “responsible borrower”, saying that if this were true, the company would not be in its current predicament.
Pua, who is also MP for Petaling Jaya Utara, was referring to an interview Arul gave Bloomberg in which he said, “As far as the banking sector and the credit sector is concerned, we are responsible borrowers”.
In a statement, Pua countered Arul’s claims saying, “1MDB has been reckless in borrowing to lend money and it has been reckless in paying over-the-top to borrow the funds.”
Pua argued that 1MDB acted recklessly when it lent US$1.2 billion to Petrosaudi International in 2010, a new company run by 20-something Tarek Essam Ahmad Obaid and borrowed another US$700 million to top off the initial loan.
Acknowledging that the loan was redeemed in full, Pua however took issue with the money being “controversially invested in Cayman Islands” instead.
Pua gave another example of 1MDB’s recklessness by pointing out the company’s penchant for “borrowing money at extremely high interest rates”.
He said, “They borrowed their first RM5 billion in 2009 at 5.75% interest and still gave a 12% discount for their 30-year bonds despite a Federal Government guarantee. The effective interest rate paid was hence 6.71%, despite the 10-year Malaysia Government Securities being priced only at 3.85% then.”
Pua also cited the two bonds totalling US$3.5 billion in May 2012 and a US$3 billion bond in March 2013 that he described as more “reckless” decisions by 1MDB.
He said, “…it (1MDB) has been abusing its near sovereign status with both explicit and implicit guarantees by the Federal Government to borrow excessively.”
He added that it was precisely this kind of recklessness that resulted in the company having accumulated a debt exceeding RM42 billion, that in his opinion was “threatening the entire Malaysian financial system”.
Cautioning Arul against pretending that there was not much wrong with IMDB and preferring instead to exonerate the company of its many “sins”, Pua added, “Without recognising the major mistakes committed to date, he cannot possibly cure 1MDB’s ills and turn around the fortunes of the besieged company.”

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