1MDB Misses $603 Million Payment to Abu Dhabi Sovereign Wealth Fund

By 

Elffie Chew

August 1, 2017, 3:41 PM GMT+10 August 1, 2017, 4:26 PM GMT+10

• Amount part of $1.2 billion settlement with Abu Dhabi’s IPIC
• 1MDB, IPIC have been in debt tussle for more than a year

1Malaysia Development Bhd. failed to make a $603 million payment to Abu Dhabi’s sovereign wealth fund as part of a settlement over a debt dispute, according to a person with knowledge of the matter.

International Petroleum Investment Co. is expected to make an announcement in London on Tuesday, said the person who asked not to be identified as the information isn’t public yet. 

The obligation, which was due on July 31, is half the amount 1MDB and the Malaysian finance ministry agreed to make to IPIC, with a second payment by the end of 2017. 1MDB and the Ministry of Finance didn’t immediately respond to emails seeking comment on the non-payment.

While Malaysia is regaining favor as investors shrug off far-reaching investigations into 1MDB and focus on encouraging signs of an economic turnaround, analysts have warned that failure to pay IPIC could hurt sentiment and become a contingent liability for the government.

Read more: 1MDB spawns worldwide probes

The ringgit was little changed as of 2:20 p.m. in Kuala Lumpur. Five-year credit-default swaps protecting Malaysia’s sovereign notes were at 81 basis points on Monday, near the lowest in almost three years, prices from CMAN show. 1MDB’s 5.99 percent notes due 2022 were little changed at 108.6 to the dollar on Tuesday, according to prices compiled by Bloomberg.

IPIC completed a merger with Abu Dhabi sovereign wealth fund Mubadala Development Co. earlier this year. A Mubadala representative couldn’t immediately comment on the matter.

Debt Tussle

1MDB and IPIC were locked in a tussle that spilled over to repayments on two sets of bonds issued by the Malaysian state fund, leading to a default in April 2016. IPIC was seeking $6.5 billion from 1MDB and the Malaysian government for failure to perform their debt obligations as the dispute moved into arbitration at the London Court of International Arbitration.

In April, the parties said they reached an agreement. On top of the $1.2 billion payment, 1MDB would also assume the coupon and principal obligations for $3.5 billion of bonds issued by it and co-guaranteed by IPIC. The settlement would be funded by the sale of 1MDB’s investment fund units, it said then.

Among the issues between the 1MDB and IPIC were billions in allegedly missing funds. 1MDB has said it could be a victim of fraud if payments intended for IPIC never made it there, while the latter had denied ownership in the company that the Malaysian investment firm transferred money to.

— With assistance by Anthony Dipaola

RNS Number : 1128D

IPIC GMTN Limited

24 April 2017

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International Petroleum Investment Company PJSC (IPIC), Aabar Investments PJS (Aabar), the Minister of Finance (Incorporated) Malaysia (MoF Inc.) and 1Malaysia Development Berhad (1MDB) are pleased to announce that an agreement has been reached between all parties that provides for a settlement in respect to the arbitration proceedings at the London Court of International Arbitration (the Settlement). The agreement is conditional on the Arbitration Tribunal making a consent award by 31 May 2017.

Under the terms of the Settlement, IPIC will receive an amount of US$602,725,000 by 31 July 2017 and a further amount of US$602,725,000 by 31 December 2017.

Separately, 1MDB and MoF Inc., undertake to IPIC to assume responsibility for all future interest and principal payments under the two bonds issued by 1MDB Group companies that are guaranteed by 1MDB and IPIC; (i) US$1,750,000,000 fixed rate 5.75 per cent. notes due 2022 issued by 1MDB Energy (Langat) Limited and (ii) US$1,750,000,000 fixed rate 5.99 per cent. notes due 2022 issued by 1MDB Energy Limited.

The parties have provided suitable undertakings and indemnities in respect of the performance of obligations under the Settlement.

The parties have also agreed to enter into good faith discussions in relation to payments made by 1MDB Group to certain entities.

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This information is provided by RNS

The company news service from the London Stock Exchange

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