Malaysia's 1Malaysia Development Berhad (1MDB) confirmed on Tuesday, April 26 that the non-payment of US$ 50.3 million (S $ 68.1 million) in interest over a now defaulted US $ 1.75 billion bond had resulted in cross-defaults for RM 7.4 billion (S $ 2.6 billion) in other bonds.
The failure to pay interest that is due on Monday, April 25 arose due to a dispute with International Petroleum Investment Company (IPIC), an Abu Dhabi state-owned sovereign wealth fund, which had guaranteed two US $ 1.75 billion 1MDB funds due in 2022.
IPIC announced that the agreement was terminated since 1MDB has defaulted on its payment of US $ 1.1 billion, however, 1MDB said it has kept its end of the bargain, Fayette Advocate has learned.
According to Singapore Law Watch, the troubled state of the Malaysian investment fund said it was withholding the payment because of a dispute with Abu Dhabi wealth fund and IPIC, guarantor of the bond, also failed to make the payment. 1MDB maintained it was an obligation of the guarantor to pay under a debt swap agreement entered into last June.
In withholding the interest payments to bondholders, 1MDB has confirmed that it has triggered cross defaults on its RM 5 billion sukuk Islamic bonds due in 2039 and the RM 2.4 billion sukuk to develop Bandar, Malaysia Sdn Bhd sukuk due between 2021 and 2024.
The rest of the debt remained undisturbed. However, an RM 800 million loan from Malaysia's Social Security Organization (SOCSO) could possibly be called in due to a material adverse effect clause, Malaysia Kini has cited.
The dispute is the latest twist in the ongoing financial fiasco at 1MDB, a brainchild of Datuk Seri Najib that is now the subject of investigations in seven countries including Singapore. The investigations, which center on billions of dollars that allegedly have gone missing at the state-owned strategic investment fund, has put the spotlight on Mr. Najib's administration as well as governance issues in Malaysia.
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