PNB bought RM579.2 million in bonds from 1MDB, says Rafizi

PKR lawmaker Rafizi Ramli questions what happened to RM3.5 billion that was borrowed by 1MDB to develop Bandar Malaysia. – The Malaysian Insider pic, May 12, 2015.Permodalan Nasional Berhad (PNB) bought RM579.2 million of sukuk bonds by 1Malaysia Development Berhad (1MDB),‎ PKR alleged today, adding that this showed a trend of government-linked companies (GLCs) being used to raise funds for the debt-ridden state investment firm.

PKR secretary-general Rafizi Ramli said that a report by The Star last year revealed 1MDB had issued RM1.5 billion worth of Islamic bonds‎ to both PNB and Lembaga Tabung Haji.

Since Tabung Haji admitted yesterday that it bought RM920.8 million worth of sukuk from 1MDB, this could only mean ‎PNB had bought the remaining RM579.2 million, said Rafizi.

In total, 1MDB borrowed RM3.5 billion, for besides the sukuk bonds, it also loaned RM2 billion from AmBank, he said.

"My checks showed that 1MDB planned to produce RM1.5 billion sukuk to pay for the development of Bandar Malaysia, as well as another RM2 billion borrowed from AmBank," Rafizi told a press conference at the party's headquarters today.

"The biggest question now is what happened to the RM3.5 billion that was borrowed supposedly to develop Bandar Malaysia?

"PNB's involvement in providing loans to 1MDB confirms my concerns that Datuk Seri Najib Razak will use public funds to save 1MDB," Rafizi said.

The Star reported in March last year that the bonds do not carry a government guarantee and are not rated.

But it said the bonds were backed by 495 acres of land in Sungai Besi, as well as the promise of future cash flow stemming from tenants renting the space in Bandar Malaysia upon its completion.

“The most important thing before you buy a bond is to check the ratings, as there are a variety of bonds out there, from sovereign bonds to junk bonds,” said Rafizi.

“So you would’ve imagined that two of our largest government-backed funds would have had enough wisdom to avoid buying non-rated bonds.”

He added that if 1MDB failed to repay Tabung Haji and PNB, the land that would be given to them as collateral was “virtually worthless” unless they had enough funds and expertise to develop it and “unlock” its true value.

“Even if you have the land, it takes a certain skill and expertise that only high-end developers have, to unlock the full value.

“So even though the sukuk are backed by the lands, it’s still an extremely risky and dangerous investment by PNB and Tabung Haji,” said Rafizi.

He said that the promise of cash flow from rent was an even bigger risk as it all hinged on the development being completed and having tenants.

Rafizi added that although The Star’s report cited unnamed sources, he believed it was true as PNB had not issued a denial since it was published last year.

“Everything on 1MDB so far has been based on informal sources and turn out to be correct. So this is definitely a red flag. And I imagine if it’s not right, 1MDB would have issued a denial and sued The Star.

“The fact that it stands and we have confirmed Tabung Haji’s transaction, I would imagine all the reports are correct and accurate,” said Rafizi.

Criticism has been mounting over the wholly-owned Finance Ministry investment vehicle, established in 2009, which had chalked up debts of up to RM42 billion.

- TMI