Abu Dhabi’s quarrel over 1MDB debt deepens

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IPIC builing
IPIC headquarter in Abu Dhabi

Disputes between Abu Dhabi”s state-owned International Petroleum Investment Co (IPIC) and troubled Malaysian state investment fund 1Malaysia Development Berhad (1MDB) intensified on May 11, with IPIC saying there was a fresh default by 1MDB.

Reuters reports of IPIC’s claims that 1MDB and the Malaysian government now owe it more than $1.2 billion, plus accrued interest, after a complex series of agreements between the two former partners went sour.

The latest turn came when IPIC said it had to make a $52.4 million coupon payment after 1MDB defaulted on $1.75 billion on bonds due in 2022.

1MDB, however, said it had “more than sufficient” funds to make the interest payments on that bond and another $1.75 billion declared in default in April, but did not due to its dispute with IPIC.

Meanwhile, Malaysia’s central bank governor Muhammad Ibrahim said he was confident the government would honour all its debt obligations for 1MDB to make a coupon payment on the $1.75 billion bond.

But central bank officials later clarified that the government’s obligation to 1MDB is not unlimited. Only the $1.2 billion sukuk bond issued by 1MDB and its $198 million loan from the Social Security Organisation are guaranteed by the government.

Credit rating agencies have put the contingent liabilities and explicit guarantees from 1MDB to three percent of the country’s GDP. Former prime minister Mahathir Mohamad even said that Malaysia could default as a result of 1MDB’s debt troubles.

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[caption id="attachment_28251" align="alignleft" width="300"] IPIC headquarter in Abu Dhabi[/caption] Disputes between Abu Dhabi"s state-owned International Petroleum Investment Co (IPIC) and troubled Malaysian state investment fund 1Malaysia Development Berhad (1MDB) intensified on May 11, with IPIC saying there was a fresh default by 1MDB. Reuters reports of IPIC's claims that 1MDB and the Malaysian government now owe it more than $1.2 billion, plus accrued interest, after a complex series of agreements between the two former partners went sour. The latest turn came when IPIC said it had to make a $52.4 million coupon payment after 1MDB defaulted on $1.75 billion on...

Reading Time: 1 minute

IPIC builing
IPIC headquarter in Abu Dhabi

Disputes between Abu Dhabi”s state-owned International Petroleum Investment Co (IPIC) and troubled Malaysian state investment fund 1Malaysia Development Berhad (1MDB) intensified on May 11, with IPIC saying there was a fresh default by 1MDB.

Reuters reports of IPIC’s claims that 1MDB and the Malaysian government now owe it more than $1.2 billion, plus accrued interest, after a complex series of agreements between the two former partners went sour.

The latest turn came when IPIC said it had to make a $52.4 million coupon payment after 1MDB defaulted on $1.75 billion on bonds due in 2022.

1MDB, however, said it had “more than sufficient” funds to make the interest payments on that bond and another $1.75 billion declared in default in April, but did not due to its dispute with IPIC.

Meanwhile, Malaysia’s central bank governor Muhammad Ibrahim said he was confident the government would honour all its debt obligations for 1MDB to make a coupon payment on the $1.75 billion bond.

But central bank officials later clarified that the government’s obligation to 1MDB is not unlimited. Only the $1.2 billion sukuk bond issued by 1MDB and its $198 million loan from the Social Security Organisation are guaranteed by the government.

Credit rating agencies have put the contingent liabilities and explicit guarantees from 1MDB to three percent of the country’s GDP. Former prime minister Mahathir Mohamad even said that Malaysia could default as a result of 1MDB’s debt troubles.

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