Missing payments makes 1MDB 'responsible'?
Published: Jan 12, 2015 9:29 AM | Updated: Jan 12, 2015 4:16 PM
The controversial state investment company 1Malaysia Development Bhd (1MDB) may not have defaulted on debt repayments but its track record continues to cause concern, PJ Utara MP Tony Pua says.
"It is absolutely true that 1MDB has never defaulted on its loans, not yet anyway,"the DAP parliamentarian said in a statement this morning.
The controversial state investment company 1Malaysia Development Bhd (1MDB) may not have defaulted on debt repayments but its track record continues to cause concern, PJ Utara MP Tony Pua says.
“It is absolutely true that 1MDB has never defaulted on its loans, not yet anyway.
“However, that does not at all mean that 1MDB does not have any troubles paying its debts, nor does it in anyway qualify 1MDB as a ‘responsible borrower’,” the DAP parliamentarian said in a statement this morning.
Pua was referring to 1MDB’s claim, as reported by Bloomberg last week, that it is a “responsible borrower”, denying it has ever defaulted on any loans.
“The fact of the matter is that 1MDB has missed two repayment deadlines for a RM2 billion debt in November and December 2014.
“This RM2 billion loan itself is part of a rescheduled and restructured debt it couldn’t pay in November 2013,” reminded Pua.
The Petaling Jaya Utara MP who has been hot on the heels of Prime Minister Najib Razak’s pet project is not the only critic of 1MDB's borrowing habits.
Last month, veteran Umno-linked newsman A Kadir Jasin alleged that Bank Negara had reluctantly acquiesced to 1MDB’s request for an extension on its non-performing loans (NPL) in order to safeguard the banking industry.
According to Pua, 1MDB’s new CEO Arul Kandasamy (right) had told Bloomberg, “As far as the banking sector and the credit sector are concerned, we are responsible borrowers” and the company has never defaulted.
The MP said, “In fact, 1MDB is facing its current predicament of a cash crunch and facing extreme difficulties in servicing both its operational and debt commitments. This is a direct result of 1MDB’s history of not being a ‘responsible borrower’.”
'World famous borrower'
Pua said 1MDB’s borrowings have become “world famous” for the extremely high interest rates.
“They borrowed their first RM5 billion in 2009 at 5.75 percent interest and still gave a 12 percent discount for their 30-year bonds despite a Federal Government guarantee.
“The effective interest rate paid was hence 6.71 percent, despite the 10-year Malaysia Government Securities being priced only at 3.85 percent then,” he added.
Pua also cited the two bonds in May 2012 amounting to US$3.5 billion (RM12.43 billion) and the US$3 billion bond in March 2013, and the use of funds from the bonds as working capital and debt repayment purposes last year.
“The above examples clearly prove that 1MDB cannot, in any way, be described as a responsible borrower.
“Instead, the more apt description of 1MDB’s behaviour to date would be ‘reckless borrower’,” he quipped.
He said while none of this is the new CEO’s doing, Arul would be “foolhardy to pretend to the public that nothing much was wrong in the past and to exonerate the company of its sins”.
“Without recognising the major mistakes committed to date, he cannot possibly cure 1MDB’s ills and turn around the fortunes of the besieged company,” Pua added.
“It is absolutely true that 1MDB has never defaulted on its loans, not yet anyway.
“However, that does not at all mean that 1MDB does not have any troubles paying its debts, nor does it in anyway qualify 1MDB as a ‘responsible borrower’,” the DAP parliamentarian said in a statement this morning.
Pua was referring to 1MDB’s claim, as reported by Bloomberg last week, that it is a “responsible borrower”, denying it has ever defaulted on any loans.“The fact of the matter is that 1MDB has missed two repayment deadlines for a RM2 billion debt in November and December 2014.
“This RM2 billion loan itself is part of a rescheduled and restructured debt it couldn’t pay in November 2013,” reminded Pua.
The Petaling Jaya Utara MP who has been hot on the heels of Prime Minister Najib Razak’s pet project is not the only critic of 1MDB's borrowing habits.
Last month, veteran Umno-linked newsman A Kadir Jasin alleged that Bank Negara had reluctantly acquiesced to 1MDB’s request for an extension on its non-performing loans (NPL) in order to safeguard the banking industry.
According to Pua, 1MDB’s new CEO Arul Kandasamy (right) had told Bloomberg, “As far as the banking sector and the credit sector are concerned, we are responsible borrowers” and the company has never defaulted.The MP said, “In fact, 1MDB is facing its current predicament of a cash crunch and facing extreme difficulties in servicing both its operational and debt commitments. This is a direct result of 1MDB’s history of not being a ‘responsible borrower’.”
'World famous borrower'
Pua said 1MDB’s borrowings have become “world famous” for the extremely high interest rates.
“They borrowed their first RM5 billion in 2009 at 5.75 percent interest and still gave a 12 percent discount for their 30-year bonds despite a Federal Government guarantee.
“The effective interest rate paid was hence 6.71 percent, despite the 10-year Malaysia Government Securities being priced only at 3.85 percent then,” he added.
Pua also cited the two bonds in May 2012 amounting to US$3.5 billion (RM12.43 billion) and the US$3 billion bond in March 2013, and the use of funds from the bonds as working capital and debt repayment purposes last year.
“The above examples clearly prove that 1MDB cannot, in any way, be described as a responsible borrower.
“Instead, the more apt description of 1MDB’s behaviour to date would be ‘reckless borrower’,” he quipped.
He said while none of this is the new CEO’s doing, Arul would be “foolhardy to pretend to the public that nothing much was wrong in the past and to exonerate the company of its sins”.
“Without recognising the major mistakes committed to date, he cannot possibly cure 1MDB’s ills and turn around the fortunes of the besieged company,” Pua added.
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