Y-Sing Liau
Bloomberg
April 21, 2016

Malaysia paid a bigger premium to bondholders to own some of its new Islamic debt as a delayed interest payment by its troubled state investment fund weighed on demand.

The government priced $1 billion of 10-year notes at a wider spread than an offering a year ago. The sale, which also included $500 million of 30-year notes, drew $6.3 billion of orders, compared with $9 billion for an issuance of the same size in April 2015.

Malaysia warned investors that it faces as much as $4.5 billion in potential liabilities as government investment company 1Malaysia Development Bhd. remains locked in a dispute with Abu Dhabi’s sovereign wealth fund over debt obligations. The disagreement has led to a delay in an interest payment of $50 million on 1MDB bonds, hurting confidence in the sovereign just when the outlook for the oil exporter was improving amid a stabilization in crude and strength in the ringgit.

“The 1MDB risk might have spooked investors’ sentiment this round as it reemerged when the deal was about to close,” said Fakrizzaki Ghazali, a Kuala Lumpur-based strategist at RHB Research Institute Sdn. Read the rest of this entry »

Jackie Horne
Finance Asia
Thursday, 21 April 2016

The Federation of Malaysia returned to the international bond markets on Wednesday with a $1.5 billion wakala sukuk whose success will almost certainly be overshadowed by the gathering storm engulfing state-owned 1Malaysia Development Berhad (1MDB).

The investment fund faces a cross-default across its $11 billion outstanding debt after one of its guarantors failed this Monday to make a $50 million interest payment on a $1.75 billion note that matures in 2022. It has now entered a grace period, which ends on April 25.

The event forced the government to issue a supplementary note to the preliminary offering circular for its sukuk on Tuesday. It said that non-payment will “constitute an event of default, which could result in acceleration of the 2022 notes and could result in cross-defaults or cross-acceleration of other indebtedness of 1MDB.”

The government added that it is liable for up to M$5.8 billion ($1.5 billion) in guarantees and a further $3 billion through a letter of support to 1MDB, but “does not believe any amounts it would be required to pay with respect of 1MDB’s indebtedness would be material to the government.” Read the rest of this entry »

The National
United Arab Emirates
April 20, 2016

A leading critic of Malaysia’s prime minister Najib Razak said corruption had reached levels never seen before in the country and urged foreign governments linked to the controversy surrounding a state investment fund to make their findings public.

1MDB, whose advisory board is chaired by Mr Razak, is under investigation in at least five countries including Switzerland and the US over allegations of money laundering and embezzlement.

Dr Mahathir Mohamad, at one time the country’s longest-serving prime minister, said the investigations into the 1MDB fund were not just a problem for Malaysia.

“Being diplomatic isn’t going to help Malaysia or anyone else,” he said on the sidelines of the International Conference on Leadership, Innovation and Entrepreneurship in Dubai yesterday. “They must recognise action needs to be taken and do what is necessary.” Read the rest of this entry »

Following increasing demands from UMNO quarters that former Prime Minister, Tun Dr. Mahathir should apologise to the Prime Minister, Datuk Seri Najib Razak over his “lie” about Najib’s RM2.6 billion “donation” scandal in the wake of the Saudi Foreign Minister’s controversial remark on the donation, former Malacca Chief Minister Tan Sri Senator Ali Rustam has upped the ante and asked the Special Task Force on Najib’s RM50 billion and RM2.6 billion “donation” twin mega scandals to also apologise.

Utusan Malaysia yesterday reported Ali demanding that the Special Task Force on 1MDB and the RM2.6 billion donation should also apologise, as the Saudi Foreign Minister Adel Al-Jubeir had “cleared the air” on the money transferred to the prime minister’s personal bank accounts.
Ali said the formation of the task force created a negative perception, as people had the perception that the Prime Minister had committed wrongdoings.

Ali claimed that the allegations by The Wall Street Journal (WSJ)” were just slander and had tarnished the good name of the Prime Minister and the nation.

Ali said: “This cannot recur. The task force must apologise.”

Ali is both wrong in claiming that the Saudi Foreign Minister had confirmed that the RM2.6 billion donation had come from Saudi Arabian government or that Wall Street Journal reports about the RM2.6 billion donation were just slander of Najib, or Najib would have filed defamation proceedings against WSJ to clear his name.

But he had re-opened a can of worms about the Special Task Force on Najib’s twin mega scandals in demanding an apology from the Special Task Force. Read the rest of this entry »

Babu Das Augustine, Banking Editor
Gulf News, Abu Dhabi
April 20, 2016

Massive debt burden seen impacting bond pricing

Dubai: Scandal-hit Malaysian government-owned fund 1Malaysia Development Berhad (1MDB) began as Terengganu Investment Authority (TIA) in 2008, a sovereign wealth fund aimed at ensuring economic development for the state of Terengganu. It was renamed 1Malaysia Development Berhad on January 2009 and made a federal sovereign fund in 2009.

The entity focuses on strategic development projects in the areas of energy, real estate, tourism and agribusiness. The 1MDB fund was founded to invest in new industries and attract foreign investment. While little of that investment occurred, the fund rolled up almost $13 billion (Dh47 billion) in debt, a big chunk from dollar-bond issuances, which today it is having trouble repaying.

While the company faced allegations of lack of transparency in its dealings there have been allegations that Malaysian Prime Minister Najib Razak and his associates benefited from various international and domestic deals. Read the rest of this entry »

Economy Watch
APRIL 20, 2016

1Malaysia Development Berhad (1MDB), a strategic development company that the government of Malaysia owns, defaulted on a $1.1 billion loan from a United Arab Emirates wealth fund. Prime Minister Najib Razak founded 1MDB and has faced a string of corruption allegations surrounding the firm, and critics have called for his resignation. 1MDB is a developmental firm designed to commence infrastructure projects and attract foreign direct investment.

Razak’s development firm is embroiled in complex scandals regarding the outright looting of funds, and the prime minister’s problems are just the beginning as domestic and international investigations ensue.

Razak is directly tied to the scandals, with critics alleging that funds had been withdrawn from the firm and deposited into his account, and he did not do himself any favors by squashing domestic investigations and removing critics from his administration. Investigators allege that over $1 billion entered Razak’s personal accounts, and a great deal of those funds supposedly derived from 1MDB, notes The Wall Street Journal. Read the rest of this entry »