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Saturday, May 30, 2015

1MDB: Turning the corner (with a little help from our Arab friends)

Husni The Hitman

The US$1 billion deal the 1MDB signed with the International Petroleum Investment Company and its subsidiary Aabar Investment caught everyone by surprise. A corporate player agrees with me this morning that 1MDB may have "turned the corner" with the deal. The diehard naysayers are not expected to agree with that at all. Even before the full details are out, the detractors say that 1. we are digging a bigger hole to fill up the existing one, and 2. It's beneath us to run to the Arabs for help. These are valid concerns, especially given our great disdain of our fellow Muslims (see Marina Mahathir's Arab colonisation of Malaysia). Perhaps they should have gone to Shylock, instead.

The fact remains though that by June 4, the deal with IPIC, which is the investment arm of the government of Abu Dhabi which controls more than 90% of the UAE's oil reserves, will render the so-called scandal that was BSI Singapore a non-issue and the Deutsche Bank will get its money long before it's due. 

The deal will involve IPIC and Aabar gaining a number of assets ,INCLUDING the units that are held in the company's BSI Singapore account. "So who says assets from the PetroSaudi JV and murabaha has no value? By June 4, it would have fully redeemed the last US$939.9 million units towards full early settlement of the Deutsche Bank facility."

Questions will and must continue to be asked about this and that hole but with the interested parties, ie the lenders, the 1MDB and IPIC/Abaar, paid and contented, everybody else will have no choice but to move on ...

Deadline, Jan 2016. They will have to move on to the next punching bag, ie the rationalisation of the 1MDB, and the poor man who's just got the job as main spokesman for the rationalisation, Husni Hanadzlah (pic). 

What's this wretched rationalisation all about?

In a nutshell, the rationalisation program will break up the 1MDB into three separate entities:

1. Edra
2. TRX
3. Bandar Malaysia

Completion date: Early 2016

I don't have all the details but one CEO blogger wrote earlier this week that the 1MDB Real Estate Division would be announcing soon its next phase of strategic property game with Bandar Malaysia, a 486-acre development that is expected to realize RM145 billion in 15 years. All units in TRX are taken up as well - you can't buy even if you have the money. And abroad recently, the PM was approached by parties interested to take over not part but the whole of Bandar Malaysia, or so I was told. 

Read Putih Mata, Lagi (or Why Tabung Haji should keep its TRX parcel and be damned) by Zakhir Mohamad, 27/5/2015.




The press statement on the IPIC deal
MEDIA RELEASE-1MDB
MINISTRY OF FINANCE MALAYSIA
PRESS STATEMENT
YB MINISTER OF FINANCE II
DATO’ SERI AHMAD HUSNI HANADZLAH 
Earlier this morning, I presented a plan for the rationalisation of 1MDB to the Cabinet. This followed an announcement by 1MDB, in February 2015, of the conclusion of a strategic review. 
As has already been achieved with Edra Energy, this will see TRX and Bandar Malaysia established as standalone companies, with full autonomy and accountability for their operational and financial performance
Whilst options are being pursued with respect to the monetisation of Edra Energy, the Ministry of Finance will remain a key shareholder in TRX and Bandar Malaysia, which will raise equity via third party investors. Proceeds raised will be used for capital expenditure and to reduce 1MDB’s debt. 
Given the above, I am pleased to announce that 1MDB has entered into a binding agreement with the International Petroleum Investment Company (“IPIC”) and its subsidiary Aabar Investments (“Aabar”). As part of this agreement, IPIC will make a payment of USD 1 billion, on or before 4 June 2015. This USD 1 billion payment will be used to repay a USD 975 million (RM3.5 billion) loan, in advance of its due date, to a syndicate of international bank lenders. The agreement will also include further measures to comprehensively address the various financial asset and liability transactions between the parties, further details of which will be announced in due course. 
This agreement marks a significant step towards reducing 1MDB’s overall debt levels, and is a crucial part of the rationalization plan I presented to Cabinet earlier, which we expect to be implemented in full by early next year. 
MINISTRY OF FINANCE
29 MAY 2015

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