MOF keeps hands off 1MDB-IPIC US$50m dispute

The Ministry of Finance (MOF) is distancing itself from the dispute between 1Malaysia Development Bhd (1MDB) and International Petroleum Investment Company (IPIC) over the US$50 million in interest due on bonds issued by the state investment fund.

Deputy Finance Minister Johari Abdul Ghani opined this was merely a business dispute between the two companies.

“So, it will not involve the government, but the government takes note of the issue. At this level, I think, we don’t want to interfere.

“We allow 1MDB and IPIC to go and sort it out between them,” he said at a press conference in Kampung Baru today.

Johari however said the government will look into the matter should a problem arise, and will monitor the progress as well as wait for the final outcome of the dispute.

“As far as the government is concerned, we are a responsible government. Whatever our commitments and guarantees, we will make sure that we fulfill them,” he said, adding the government has never bailed out 1MDB in paying any debts or interest.

When it was pointed out that payment of the interest was already due, Johari said the bond was guaranteed by IPIC.

“IPIC guaranteed the bond and the interest. Obviously, if the money does not reach the bond holder, whoever guaranteed it has to be responsible.

“But they will then, in turn, sue 1MDB, so 1MDB should sort it out, find a way out.”

Ministry hasn't forked out interest

Johari also confirmed that the Finance Ministry has yet to step in to pay the interest due.

“We have not paid anything, we have not paid. We only paid all the interests or debts incurred by the government,” he said.

Last June, IPIC assumed 1MDB's obligation to pay the interest due on the bonds in a bailout plan, in which 1MDB in exchange had undertaken to transfer assets and cash as compensation to IPIC.

However, IPIC last Monday said 1MDB and MOF are now liable for all claims arising from the bonds, including paying for the interest, as the Abu Dhabi firm had terminated the rescue deal claiming 1MDB and the ministry have failed to live up to their end of the bargain.

If 1MDB fails to pay the interest, with IPIC already backing out of the rescue deal, it will result in a default which reports say may trigger "cross-defaults" on 1MDB's other commitments, with other creditors demanding early settlement or accelerated payments for 1MDB's other debts which now stand at about US$5.1 billion.

This could even impact Malaysia and its financial credibility, as well as the economy as a whole.

This is because a number of 1MDB loans are guaranteed by the government, which the recent public accounts committee (PAC) findings state to be to the tune of US$20 billion, which taxpayers may have to foot in the end. -Mkini