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Tue, 25th April 2017

Anirudh Sethi Report

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1MDB defaults on bond after missing interest payment -Ringgit Tumbles

Malaysia’s state development fund 1MDB said it had not made an interest payment of $50.3m on a $1.75bn bond following a dispute with Abu Dhabi’s sovereign wealth fund.

The two funds are in dispute over a bailout agreement struck last year, with Abu Dhabi’s International Petroleum Investment Company claiming 1MDB has failed to meet an obligation to pay $1.1bn plus interest

Ipic says it will pay bondholders, but only after 1MDB defaults.

The default triggered cross defaults on 1MDB debts due in 2039 and between 2021 and 2024.

1MDB said in a statement on Tuesday:

1MDB has been surprised by IPIC’s comments and unequivocally asserts that it has attempted to meet all its obligations to IPIC, whereas IPIC has publicly denied receipt or knowledge of various financial transactions and/or guarantees entered into between the parties. Accordingly, whilst 1MDB has the funds to have made the interest payment, it is 1MDB’s position, as a matter of principle, that it was IPIC’s obligation to do so. Until IPIC accepts that all obligations have been met, 1MDB is obliged to withhold payments and will seek legal recourse and resolution.

The Malaysian ringgit weakened by as much as 0.7 per cent following the announcement, making it the worst-performing Asian currency this morning.

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