Putrajaya forks out RM600m, as SRC is unable to service KWAP loans

NAJIB TRIAL | Since 2016, Retirement Fund Inc (KWAP) repeatedly stressed to the media that SRC International Sdn Bhd, a former 1MDB subsidiary, had been making regular payments on its RM4 billion in loans from the pension fund.

However, a witness told the High Court in Kuala Lumpur today that since 2015, SRC International had been unable to service the interest on its two tranches of RM2 billion loans each.

The deputy secretary of the Finance Ministry's Strategic Investments Division, Afidah Azwa Abdul Aziz (photo, above), when testifying in the SRC International trial of former prime minister Najib Abdul Razak, said the interest payment had come from public funds.

Afidah said between December 2015 and December 2017, almost RM600 million in loans were granted by the federal government to SRC International for it to service its interest payments for the RM4 billion loans from KWAP, which were guaranteed by the government.

To date, she said, the government continued to fund SRC International's servicing of the KWAP loans, but did not provide any figures beyond December 2017.

Reading from her witness statement, Afidah said SRC International had been servicing the KWAP loans, but stopped doing so beginning March 2015 and by August 2015, KWAP had informed SRC International that the pension fund will declare an "event of default" if the company was unable to settle the outstanding sum due.

In September 2015, SRC International, KWAP and the Finance Ministry attended a meeting chaired by then treasurer-general Mohd Irwan Serigar, at which SRC International informed that it could not service its loans due to its accounts in Switzerland being frozen.

The government eventually agreed to extend an RM92 million loan to SRC International to help the company repay its debts to KWAP.

This new loan was approved on Nov 6, 2015, to prevent an "event of default", which would allow KWAP to recall the full loan amount from SRC International, and if the company was unable to pay, it meant the government needed to foot the entire sum of RM4 billion.

"To my knowledge, SRC did not repay the RM92 million loan to the Finance Ministry. SRC International also did not make subsequent payments on its loan interests to KWAP because it again asked the Finance Ministry for a second short-term loan to pay its KWAP debt," Afidah said.

She said the Finance Ministry agreed for the federal government to extend another RM250 million loan to SRC International, which was inked on Sept 27, 2016.

Afidah said SRC International also did not repay this RM250 million loan and requested for a third loan in 2017. This time, an RM300 million loan was granted to SRC by the federal government.

This brought the three approved loans to a total of RM642 million, but only around RM595 million was utilised.

"All three loans the Finance Ministry approved to SRC International were paid directly by the ministry to KWAP," she said.

Afidah said the RM92 million loan was approved by the cabinet, while the subsequent RM250 million and RM300 million loans received Najib's consent.

She did not say anything about cabinet approval for the second and third loans in her witness statement.

Afidah said while it was not unusual for the government to pick up the tab on loans that it has guaranteed, they are normally for infrastructure projects which could not generate sufficient revenue during the construction period.

"But for SRC International, the loans were intended for investment and the company should have received returns on the investments," she said, adding that SRC must fully settle the KWAP loans by 2022.

Najib is facing seven charges of abuse of power, criminal breach of trust and money laundering involving a sum of RM42 million from SRC International. - Mkini