Report says 1MDB failed to repay US$563m loan due December


(Malay Mail Online) – 1Malaysia Development Bhd, a state investment company, failed to repay a RM2 billion loan due on December 31, the Edge Financial Daily reported, citing people it didn’t identify.

The company has been given until January 30 to settle the debt to lenders led by Malayan Banking Bhd and RHB Bank Bhd that was first due on November 30, the newspaper said.

A company spokesman declined to comment on the report today.

1Malaysia Development, known as 1MDB, announced a leadership change yesterday as part of efforts to bolster its performance after it was criticised by opposition lawmakers and former Prime Minister Mahathir Mohamad over rising debt. Fitch Ratings Ltd. has said Malaysia’s contingent liabilities such as 1MDB’s borrowings are weighing on the sovereign rating outlook.

Shares of Maybank fell as much as 2.2 per cent in Kuala Lumpur trading, while RHB Capital Bhd dropped as much as 3.2 per cent, outpacing the 1.5 per cent decline in the benchmark FTSE BursaMalaysia KLCI Index.

Malaysia’s ringgit fell to the lowest since July 2009 and government bonds dropped as a slump in crude prices damped the outlook for the net oil exporter. The ringgit retreated 0.6 per cent to 3.5540 per dollar, according to data compiled by Bloomberg.

Credit risk

Credit-default swaps insuring Malaysia government debt against non-payment jumped 10 basis points to 125 basis points, Royal Bank of Scotland Group Plc prices show. That’s set for the highest in 11 months, according to data provider CMA.

The swaps rose 8 basis points January 5 to 116.5 basis points, the highest since February last year, CMA data show. The swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements.

1MDB’s US$3 billion (RM10.66 billion) of 4.4 per cent notes sold to investors at par in March 2013 and due 2023 fell 1.3 cents to 97.749 cents on the dollar as of 10.28am in Hong Kong, sending yields to 4.735 per cent. That’s the lowest since Sept. 25, prices compiled by Bloomberg show.

The 1MDB loan is part of a RM5.5 billion parcel of debt borrowed via subsidiary Powertek Investment Holdings Sdn in May to refinance a 2012 bridge loan for the purchase of power assets, according to the Edge Financial Daily. The central bank has told key company executives in a recent meeting that action will be taken if the loan isn’t settled, the newspaper said.