With ‘loan shark’ guarantee, 1MDB had less cash after taking US$3.5b loan, Pua claims

Petaling Jaya Utara MP Tony Pua (pic) questioned if Prime Minister Datuk Seri Najib Razak had given his written approval for the ‘outrageous’ loan transaction. ― Picture by Choo Choy MayKUALA LUMPUR, Sept 28 — 1Malaysia Development Berhad (1MDB) bizarrely ended up with a deficit of US$649 million (RM2.85 billion) after issuing US$3.5 billion in bonds in 2012, following various payments including offering US$993 million to an Abu Dhabi state fund to guarantee the bond issue, DAP’s Tony Pua claimed today.

The Petaling Jaya Utara MP pointed out that 1MDB had paid about US$300 million to Goldman Sachs as “certain commissions, fees and expenses”, for arranging the US$3.5 billion bonds, placed a US$1.4 billion “refundable deposit” as collateral with Abu Dhabi state fund International Petroleum Investment Corporation (IPIC), and finally, offered US$993 million to IPIC to secure the bond issue, paid IPIC compensation of US$975 million borrowed from a Deutsche Bank-led consortium when terminating the options granted to IPIC, while still owing IPIC US$481 million as at December 31 last year.

“Based on the above known facts, after deducting (1) US$3.5 billion with (2), (3) and (4), 1MDB actually ended up with a deficit of US$649 million!” Pua said in a statement, listing the various 1MDB payments as (2), (3) and (4) respectively.

“This means that the wholly-owned Ministry of Finance subsidiary ended up with less cash than it had after it took the loan!

How absolutely bizarre can you get?  Why would 1MDB borrow so much money, causing RM15.4 billion of indebtedness based on today’s exchange rates, when 1MDB effectively doesn’t get to use any of the funds raised?” the opposition lawmaker questioned.

Pua also said that even if the US$975 million Deutsche Bank loan were to be removed from the equation, it only meant that although state investment fund 1MDB had borrowed US$3.5 billion, it effectively only had access to US$326 million, less than 10 per cent.

“Anyone who can count will be able to see that there are some serious criminal shenanigans which took place with the above bond arrangement,” he said.

The DAP publicity chief questioned if Prime Minister Datuk Seri Najib Razak had given his written approval for the “outrageous” loan transaction, pointing out that Clause 117 of 1MDB’s Memorandum and Articles of Association states that the prime minister must give his “written approval” for any of 1MDB’s deals.

“If Datuk Seri Najib Razak 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,” said Pua.

“However, if the prime minister has granted his written approval, he must immediately explain to the nation why he agreed to such unbelievably stupid and dumbfounding terms of the US$3.5 billion bond issues which have contributed in substantially to the financial crisis in 1MDB today,” he added.

Pua said last week that the US$993 million payment to IPIC to secure 1MDB’s US$3.5 billion bond issue in 2012 represented a whopping 28.4 per cent cost to 1MDB, terms he described as worse than those of “loan sharks” in Malaysia.

He had also told auditing firm Deloitte to corroborate a Wall Street Journal report alleging that the US$993 million payment was not registered in IPIC’s account. 1MDB has insisted that the payment was registered in its own accounts.

- malaymail