State-owned 1Malaysia Development Berhad (1MDB) has made the final settlement of US$602.7 million (S$807 million) in debt obligations to Abu Dhabi’s International Petroleum Investment Company (Ipic) by divesting its stake in two companies to buyers linked to Chinese state-owned enterprises.
The payment, the second tranche to a US$1.2 billion loan Ipic extended in July 2015 to 1MDB, was made last Friday, ahead of the end-December deadline that both parties agreed to in April this year.
Ipic confirmed in a statement yesterday that “it has now received all the funds required to be paid to it under the Settlement with the Minister of Finance (Incorporated) Malaysia and 1MDB and the Consent Award made on 9 May 2017”.
One Malaysian government official familiar with the settlement said: “The process to pay is being initiated early because the funds are in place and 1MDB wants to avoid any administrative trip-ups that could result from the banking holidays at the end of the year.”
The first tranche was settled in August.
The second instalment was paid with funds raised from the sale of investments in financial instruments held by the Malaysian investment company and stakes held in two 1MDB-related entities that own tracts of land in the northern Penang state and another 129ha real estate parcel around Port Klang, the sources said.
Malaysian government officials declined to identify the buyers in the real estate transactions, but one financial executive close to the situation said that the equity interests in the 1MDB real estate entities were acquired by “concerns ultimately controlled by Chinese state-owned enterprises”.
In a statement issued yesterday, 1MDB said all funds were paid from proceeds of its ongoing rationalisation programme.
Opposition MP Tony Pua had previously questioned how 1MDB was funding these repayments, and alleged that the Ministry of Finance’s refusal to answer indicated that 1MDB had help from the government.
For the first tranche, 1MDB had said in April that it would use investment units owned by 1MDB subsidiary Brazen Sky Limited to fund the payment.
In June, however, the US Department of Justice said these so-called fund units are “relatively worthless”.