RM4BIL KWAP LOAN IN DANGER: JOHARI DROPS BOMBSHELL – SRC IS IN FINANCIAL TROUBLE
KUALA LUMPUR – Malaysia’s Second Finance Minister Johari Abdul Ghani admitted on Tuesday (Nov 1) that SRC International is in financial difficulty, after facing problems in recovering the money it had deposited at BSI bank.
This comes after Singapore authorities shut down a branch of the Swiss bank in the city-state, for breaching money laundering regulations linked to state fund 1MDB.
SRC International, set up in 2011 by Malaysian Prime Minister Najib Razak to pursue strategic overseas investments in energy resources, was formerly a subsidiary of 1MDB.
Speaking on the sidelines of a Malaysian capital symposium, Mr Johari said there is a plan in place for SRC but declined to elaborate.
“SRC is … facing problems,” he said. “I don’t want to elaborate the details. Let the process of SRC trying to recover their money take its course. Most of money they invested is parked under BSI bank but because BSI is under investigation, I was told by the management of SRC that the money … was frozen therefore they cannot take back the money. Let’s wait.”
Mr Johari declined to comment on whether the assets of SRC International will be put up for sale, following a report that Malaysian government negotiators are pursuing a plan for a China-led takeover of SRC assets, including a coal mine in Mongolia. The reported takeover is said to be in return for fresh capital to help finance the debt owed to civil service pension fund KWAP.
In 2011, SRC took a US$1 billion loan from KWAP to fund strategic overseas investments in energy resources. The repayment amount is expected to balloon to US$158 million next year and almost US$230 million in 2018.
The scandal involving KWAP, which relies on contributions from 1.6 million pro-government civil servants, may backfire on Mr Najib, who is expected to call for an early election next year.
Meanwhile, KWAP CEO Wan Kamaruzaman said that so far, SRC has met interest repayments every half-yearly and added that he is not unduly worried.
“They (SRC) said they will meet the requirement of the covenants of the loan. SRC terms are just like any other loan – it’s half-yearly – and they have met every single repayment exactly, so there is no issue.”