Deal to shave off RM16b of 1MDB debt is off

PETALING JAYA: 1Malaysia Development Bhd's (1MDB) plans to slash RM16 billion in debts via an agreement with Abu Dhabi's International Petroleum Investment Company (IPIC) in June 2015 has been shelved, after IPIC announced today that it has terminated the deal.
The deal signed between 1MDB, the Ministry of Finance and IPIC was for 1MDB to hand over its US dollar-denominated cash deposits and part of its US dollar funds under management, either in cash or units, in exchange for IPIC taking over US$3.5 billion bond principal and interest obligation, which it had guaranteed, and an advance of US$1 billion cash.
IPIC said in a filing with the London Stock Exchange, where IPIC is listed, that the termination was to do with 1MDB's failure to perform a US$1.1 billion (RM4.29 billion) payment and other obligations owed to IPIC.
IPIC said it had engaged with 1MDB and MOF to remedy their defaults without success.
"IPIC and Aabar have now reserved all of their rights under the binding term sheet and are considering their options in relation to this dispute, including referring the matter to the appropriate dispute resolution forum," it added.
1MDB in a separate statement today, said the group defaulted on interest payment for one of its bond which was part of deal with IPIC, after IPIC did not make interest payment for it which was due today.
Interest was payable on the semiannual interest payment date of April 18, 2016 in respect of the $1.75 billion 5.75% Notes due 2022 issued by 1MDB Energy (Langat) Ltd.
1MDB which made no mention of the termination of the crucial deal by IPIC, said that a dispute had recently arisen between IPIC and
1MDB concerning regarding their obligations to each other.
The default in US$1.1 billion payment to IPIC by 1MDB was not mentioned.
1MDB said it had nothing further to add when further details were requested.
Meanwhile, 1MDB said the group and its entities will meet all of their other obligations under any other financing arrangements and have ample liquidity to do so.
This news comes a week after IPIC denied ownership of Aabar Investments PJS Ltd, a company that holds RM4.89 billion of 1MDB's deposits according to its accounts for the financial year ended March 31, 2014.