PAC REPORT The government would need to fork out RM20.31 billion, not including interest payments, if 1MDB fails to pay off its debts, the Public Accounts Committee said in its report on 1MDB.
This is more than the government allocation for higher education spending in 2016 and about seven times the size of the entire Selangor government budget this year.
The PAC probe into the state investment firm found that the federal government committed RM5.8 billion in government-guaranteed loans, RM13.56 billion through a letters of support and RM840 million in standby credit.
The letters of support were considered part of government exposure as it states that the government would step in to honour bond payments, if 1MDB fails to do so.
This is for the US$3 billion fundraising exercise via investment bank Goldman Sachs, for a 50-50 joint venture with Aabar, a subsidiary of Abu Dhabi’s International Petroleum Investment Corporation (IPIC)
The letter of support issued on March 14, 2013 with cabinet approval states that 1MDB will step in if its subsidiary 1MDB Global Investment Ltd (1MDB GIL) fails to honour the bonds.
1MDB GIL is a British Virgin Islands registered entity set up to receive the proceeds of the fundraising exercise.
“If 1MDB, as a shareholder in 1MDB GIL fails to provide the funds, the federal government will take over and provide what is necessary,” the report reads.
1MDB and Aabar had managed to raise US$2.72 billion for this, but the PAC found that US$1.75 billion was instead invested in a portfolio with BSI bank in Lugano, Switzerland.
The PAC was told this was pending finalisation of the joint venture with Aabar.
1MDB earlier denied that the government had guaranteed the bonds related to any of its dealings with IPIC.
[More to follow]
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