KUALA LUMPUR — June 29, 2015: 1Malaysia Development Bhd (1MDB) today clarified that neither the Ministry of Finance nor the government has provided guarantees for the recent commercial transaction between the company and International Petroleum Investment Corporation (IPIC).
“It is publicly known that IPIC issued guarantees in 2012 for the payment of interest and principal on two US$1.75 billion bonds issued by 1MDB, totalling US$3.5 billion in principal and up to US$2 billion in interest.
“The government has not guaranteed either of these bonds,” said 1MDB in response to various incorrect statements attributed to Petaling Jaya Utara member of parliament Tony Pua in relation to a binding term sheet agreed between 1MDB and IPIC recently.
Hence 1MDB said it is irresponsible of Pua to suggest that the binding term sheet, a commercial transaction, has resulted in further guarantee obligations by the Malaysian government.
“It is public information that the government has only issued a letter of support and this was for a different US$3.0 billion bond issued by 1MDB,” it said.
In total, the government has only provided explicit guarantees for RM5.8 billion of 1MDB debt.
According to 1MDB, Pua has also deliberately misled the public by failing to mention the crucial “and vice-versa” clause in relation to the indemnity, i.e the indemnity applies both ways –- to IPIC as well as 1MDB –- in relation to performance of obligations by the parties.
“Such a two-way indemnity is a standard clause in commercial transactions to ensure neither party is ‘out of pocket’ for non-performance by the other,” said 1MDB. while confirming that it fully intends to perform its obligations under the binding term sheet.
The binding term sheet executed with IPIC is a key component of the 1MDB rationalisation plan as announced by the Ministry of Finance last May 29.
The success of this approach has been evidenced by the recent repayment of a RM3.6 billion loan by 1MDB.
The company has also explained that commercial negotiations are ongoing between 1MDB and IPIC to reach a definitive agreement, which will ultimately result in a reduction of approximately RM16 billion of its debt.
“1MDB fully intends to share further information once a final agreement is reached,” it said. — Bernama