SRC insolvent, Finance Ministry repaying RM4b debt

Former 1MDB subsidiary SRC International Sdn Bhd is insolvent, forcing its current owner - the Finance Ministry - to service the repayment of a RM4 billion loan to the Retirement Fund Incorporated (Kwap), according to sources.

Kwap had disbursed the loan in two tranches - in 2011 when SRC International was a 1MDB subsidiary and in 2012 after it was taken over by the Finance Ministry. 

Met in Kuala Lumpur yesterday, Finance Minister Lim Guan Eng declined to comment on the matter.

Two days ago, Kwap chief executive officer Wan Kamaruzaman Wan Ahmad told reporters that SRC International's repayments to the fund were "on track".

Last November, then second finance minister Johari Abdul Ghani revealed that SRC International was facing problems because its assets at BSI Bank, Singapore had been frozen.

Sources later told Malaysiakini that payments to Kwap were being serviced over the past few years by the Finance Ministry, which took over SRC International from 1MDB to help reduce the latter's burgeoning debt.

Much like 1MDB, SRC International was a strategic investment company which relied on government-backed borrowings.

It was set up in January 2011 with the approval of then prime minister Najib Abdul Razak, who was also finance minister and chairperson of 1MDB's advisory board.

The goal was to undertake strategic investments in the oil and gas sector as well as the renewal of the energy sector.

According to the auditor-general's department, SRC International secured a RM20 million grant from the Economic Planning Unit - an agency under the Prime Minister's Department - and later secured a RM2 billion loan from Kwap with a 10-year repayment period.

The company then invested US$60 million in a joint venture with Aabar Investment PJS in Nov 2011. Little is known of what happened to this deal.

Following this, SRC International invested US$45.5 million in a Mongolian coal project which the auditor-general noted was done without a proper feasibility study.

SRC International then acquired US$120 million in shares from Indonesia's PT ABM Investama TBK (ABMM) in late 2011.

Since hitting a high of Rp3,950 in December 2011, the share price of ABMM has been on a downtrend and closed yesterday at Rp2,188 - nearly half the value when SRC International acquired the shares.

SRC International was taken over by the Ministry of Finance Incorporated (MOF Inc) on Feb 15, 2012.

According to the auditor-general's report, the transfer of ownership had reduced 1MDB's operating cost marginally and the government's exposure through the 1MDB Group by RM2.902 billion.

There has been little clarity as to what happened to SRC International's assets. The Finance Ministry told Parliament that some of it have to be sold. 

Lawyer Nik Faisal Ariff Kamil was the CEO of SRC International throughout the time it was part of 1MDB.

Checks on the Immigration Department website has suggested that Nik Faisal was facing travel restrictions again, after it was lifted last year.

Nik Faisal, a lawyer, is believed to enjoy close ties with Najib, who is now facing police and MACC probes over 1MDB related matters. -Mkini