Friday, May 15, 2015

1MDB's "Little" Debt Secret

1MDB CEO Arul Kanda Kandasamy should not hide behind the skirt of “banking confidentiality” to avoid responding as to whether 1MDB will be fulfilling its US$975 million debt obligations to a consortium of 6 foreign banks

The Singapore Business Times reported yesterday that a consortium of “jittery” banks led by Deutsche Bank has asked for their US$975mil loan to be repaid by 1Malaysia Development Bhd (1MDB) more than 3 months ahead of its due date.

The US$975mil loan was secured with 1MDB’s wholly owned Brazen Sky’s US$1.103bil. The report by Singapore Business Times said that money by Brazen Sky is said to have been kept at Swiss private bank BSI Singapore. However, quoting sources, the report said the “securitisation document” for the loan has now been deemed “incomplete”, as one of the covenants was allegedly not fulfilled.

This has followed the exposé by The Sarawak Report which cited leak investigation reports that the BSI Bank statements lodged by 1MDB to these banks was fraudulent. Allegedly BSI Bank only held “paper assets” and not “cash” as claimed by 1MDB.

The decision by the “panicky” Deutsche Bank-led consortium can lead to serious consequences where all of 1MDB’s RM42 billion of debt immediately default. Despite the severity of the issue, 1MDB has chosen to remain silent by ridiculously citing “banking confidentiality”.

President and group executive director Arul Kanda Kandasamy, in an email reply to The Malaysian Insider's query said

We are aware of recent press reports and statements concerning a loan taken by 1MDB in September 2014. While we would like to respond in detail, this relates to a confidential banking matter, which prevents us from commenting at the present time. However, we intend to update the market as soon as we are in a position to do so.

The excuse provided in the reply is highly irresponsible and is the reason why the entire market is flooded with various speculations, true and wild as 1MDB has failed to address key questions in a frank and transparent manner. As a result, confidence in the financial markets has been shaken and the Malaysian ringgit has been adversely affected.

Malaysians are not asking Arul Kanda to reveal the loan agreement. Malaysians are interested to know if 1MDB will be able to fulfil its financial obligations to repay the US$975 million (RM3.6 billion) loan as demanded by the Banks in a timely manner. It will also provide great comfort to Malaysians if 1MDB can prove its ability to repay the loan because the last time, it had to beg local billionaire Tan Sri Ananda Krishnan to arrange a group of private investors to help pay-off a RM2 billion local loan.

Malaysians are also interested to know if the US$1.1 billion parked in BSI Bank is indeed held in cash or is it just some “paper assets”. The Prime Minister Dato’ Seri Najib Razak has responded to me in the last parliamentary sitting that the amount is held in cash, before the exposé by the Sarawak Report.

None of the above questions involved the “confidential” details of the lending agreement.

Unfortunately, Arul Kanda chooses to conveniently use ridiculous the banking confidentiality excuse to cover up everything. It is this massive cover up that Malaysians have lost confidence, not only in the 1MDB management and board of directors but also the Prime Minister, Dato’ Seri Najib Razak and the Barisan Nasional coalition government.

Tony Pua


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