German banks seek early repayment of 1MDB loan, could trigger default on RM42b debt
(MMO) – Lenders spooked by the controversy surrounding 1 Malaysia Development Bhd (1MDB) are contemplating demanding the full settlement of a US$975-million (RM3.6 billion) loan ahead of its due date in August, according to Singapore’s Business Times.
More worrying for the state-owned investor is that the consortium led by the Deutsche Bank Singapore could trigger cascading defaults on the remainder of 1MDB’s reported RM42 billion in debt if they declare the firm to be delinquent.
The consortium’s fears are said to be prompted by “incomplete” documents that 1MDB provided as a form of security, rendering the terms of the loan unmet. This alleged breach allows the banks to rescind the loan ahead of the August due date.
The loan was secured via the US$1.103 billion that 1MDB said was being held by its Brazen Sky unit in BSI Singapore, originally from a tranche of offshore deposits it previously kept in the Cayman Islands.
“What was earlier construed as a tightly collateralised loan is now making the banks nervous, given this controversy,” an unnamed source told the Singapore business daily.
The BT said the banks and 1MDB are currently in “intense negotiations” to prevent a recall of the loan that the Malaysian state investor took to pay Abu Dhabi’s International Petroleum Investment Company (IPIC) to terminate an option to subscribe for the future listing of 1MDB’s power asset, Edra Energy.
