Pua: 1MDB only got 10pc of USD3.5b bond

Anyone who can count can see that serious criminal shenanigans took place with the bond arrangement.

KUALA LUMPUR: Petaling Jaya Utara MP Tony Pua estimates that although 1MDB borrowed USD3.5 billion, it had effectively access to only USD326 million or less than 10 per cent of the funds raised. “Anyone who can count can see that serious criminal shenanigans took place with the bond arrangement.”

He wants Prime Minister Najib Abdul Razak to confirm whether he had authorized the outrageous “loan shark” guarantee arrangement with International Petroleum Investment Corporation (IPIC) for 1MDB’s USD3.5 billion of bonds in 2012

He warned that if the Prime Minister had granted his written approval, he must immediately explain to the nation why he accepted such unbelievably “stupid and dumbfounding” terms for the USD3.5 billion bond issue which has contributed substantially to the financial crisis in 1MDB today.

Based on the known facts, after “certain deductions”, 1MDB actually ended up with a deficit of USD649 million. This means that the wholly-owned Ministry of Finance subsidiary ended up with less cash than it had after it took the loan,” said Pua who is also DAP National Publicity secretary.

The certain dedications are USD300 million to Goldman Sachs as “certain commissions, fees and expenses” for arranging the bonds; USD1.4 billion collateral placed by 1MDB with IPIC as “refundable deposit”; and 1MDB’s termination of the options granted to IPIC or its subsidiary Aabar Investment and paid as compensation:

How absolutely bizarre can you get?

Why would 1MDB borrow so much money, causing RM15.4 billion of indebtedness based at today’s exchange rates, when 1MDB effectively doesn’t get to use any of the funds raised?

“Even in the event that there was a fraudulent round-tripping exercise as I had questioned in my statement last week, removing the USD975 million Deutsche Bank loan from the equation does not make the situation much prettier, “said Pua.

Again, said Pua, the question now was whether the Prime Minister, who is also the Finance Minister, gave his written approval for the above outrageous loan transaction, as required under 1MDB’s Memorandum and Articles of Association (M&A). “Clause 117 of the M&A states that the Prime Minister must give his ‘written approval’ for any of 1MDB’s deals, including the firm’s investments or any bid for restructuring.”

“This includes ‘any financial commitment (including investment), restructuring or any other matter which is likely to affect the guarantee given by the Federal Government of Malaysia for the benefit of the company, national interest, national security or any policy of the Federal Government of Malaysia’.”

If the Prime Minister did not provide the written approval for the above bond issuance, then the Board of Directors of 1MDB must be taken to task for breaching the mandate given to them, added Pua.

Last week, the Wall Street Journal (WSJ) reported that USD993 million which was apparently paid to IPIC by 1MDB to buy back the latter’s options had not been properly accounted for. The payment was not reflected in the audited accounts of IPIC. Instead, IPIC’s books showed that 1MDB still owes an additional USD481 million to the former for the termination of the options as at December 2014.

These options were granted to IPIC’s subsidiary, Aabar Investment PJS in 2012 to acquire up to 49 per cent of its two energy subsidiaries, Powertek Investment Holdings and 1MDB Energy (Langat) Sdn Bhd, as part of the condition for the provision of a guarantee by IPIC for the USD3.5 billion 1MDB bonds.