Malaysia’s 1MDB says to delay payment to Abu Dhabi’s state fund

Reuters

Kuala Lumpur – Malaysia’s 1Malaysia Development Berhad (1MDB), which missed a deadline to pay about $600 million to Abu Dhabi state fund IPIC, said on Tuesday it will make the payment this month.

1MDB has written to IPIC to inform them that the payment obligations, originally due on July 31, will now be met in August, the Malaysian fund said in a statement.

The payment was part of its settlement deal over a bond dispute. It was supposed to be made from proceeds of 1MDB’s rationalisation plan, but 1MDB is yet to receive those funds, it said.

Earlier, Reuters also reported that Abu Dhabi’s state investor Mubadala had not received any information about the payment.

Here is the report: 

Abu Dhabi’s state investor Mubadala has not received any information from banks about a $600 million payment due from 1MDB, a source said, after a deadline for the payment lapsed on Tuesday.

The deadline for the payment was midnight Monday New York time or Tuesday in Asia, said the source, who asked not to be identified because of the sensitivity of the matter.

Malaysia’s The Edge daily reported on its website, citing unnamed sources, that 1MDB had missed the deadline for the payment.

The Malaysian state investment fund reached an agreement in April to pay International Petroleum Investment Company $1.2 billion in two installments. 1MDB had said payments would be made to IPIC by monetizing investment fund units.

IPIC was merged with Mubadala earlier this year.

Bonds linked to 1MDB remained largely unmoved on Tuesday.

1MDB’s 4.4% bonds due 2023 are trading slightly weaker at 91/93 while the bonds due 2022 are down half a point at 108.3/108.9 cents on the dollar.

As part of the agreement, 1MDB and Malaysia’s Ministry of Finance will assume responsibility for all future interest and principal payments under two bonds worth $3.5 billion in total.

The agreement was reached after the Malaysian fund defaulted on its bonds in 2016, sparking a dispute with IPIC, which asked a London court to arbitrate a claim totalling some $6.5 billion.

1MDB and IPIC declined to comment.

“Despite the various guarantees and debt consolidation plans there is 1MDB debt outstanding, and the debt still presents a contagion risk to the government,” said Moody’s Analyst Christian de Guzman.

“We don’t have a clear picture of what the liability structure looks like but it is much smaller than the last publicly disclosed level of 4% of GDP in 2014,” he said.