Arul Kanda’s role in loan to 1MDB queried

He must dispel the notion that he may have been involved in a conflict of interest situation and compromised 1MDB's interests.

KUALA LUMPUR:Petaling Jaya Utara MP Tony Pua has demanded that 1MDB chief Arul Kanda Kandasamy should confirm if he was involved in the USD975 million loan to the company from a consortium while he worked in the Abu Dhabi Commercial Bank (ADCB).

As highlighted by The Edge Financial Daily on Thursday, Arul Kanda was working in ADCB when the banking consortium granted the loan on 1 September 2014, noted Pua who is also DAP National Publicity Secretary.

He further noted that ADCB was one of the Deutsche Bank-led consortium lenders for the loan which, according to the Singapore Business Times, will be recalled nearly four months early by the jittery banks as the market panics. 1Malaysia Development Berhad (1MDB) is a wholly-Ministry of Finance owned company touted as a strategic investment arm.

In addition, added Pua, The Edge reported two months ago that the proceeds of the said loan substantially went towards buying back options deposited with ADCB’s sister company, Aabar Investments Limited, to acquire 1MDB’s power assets.

The 1MDB March 2014 financial report stated that the company had “agreed to compensate (Aabar) at a consideration agreed under the terms and conditions” of a 22 May 2014 settlement agreement which was never disclosed.

The options were initially granted to Aabar as part of the terms for Aabar’s parent, International Petroleum Investment Corporation (IPIC), to provide a guarantee for two 1MDB bond issues amounting to USD3.5 billion (RM12.6bn).

Again, stressed Pua, this begs the question whether Arul was involved in putting together the loan to 1MDB and whether he was involved in the dealings of IPIC and Aabar when he was working in Abu Dhabi. “Given the fact that ADCB, IPIC and Aabar are all owned by the Abu Dhabi government, it makes Arul’s role as 1MDB president even more delicate and subject to scrutiny for possible conflict of interest.”

Given the exposé, continued Pua, Arul would have no choice but to explain his degree of involvement in 1MDB fund-raising exercises prior to him joining the company. “His silence on the matter will only strengthen speculation on conflict of interest, and that 1MDB’s interests may have been compromised in the deal”.

Arul Kanda must also disclose how much exactly did 1MDB pay to “buy back” the options transferred to Aabar Investments by its parent company, continued Pua. “The only amount cited in the March 2014 financial statements is USD250 million which was raised via a bridging loan facility in May 2014.”

“However, the amount was not finalized since final settlement will depend on the final valuation of the initial public offering (IPO).” The IPO of 1MDB’s energy asset, Edra Global, may not materialize.

Therefore, the question is whether the USD975 million was also used to pay Aabar for the options, points out Pua.

If it is indeed so, he said, 1MDB would have paid an astronomical USD1.23 billion to the Abu Dhabi companies in order to secure a guarantee from IPIC for the USD3.5 billion loan. “Under such circumstances, it would not be an exaggeration to say that 1MDB secured a guarantee from an international loan shark.”