Malaysian state investor 1Malaysia Development Bhd missed the repayment of a RM2 billion ($563 million) bridge loan that was due end-December, two people close to the matter said on Tuesday. The firm, known as 1MDB, is now exploring ways to settle the payment to lenders and RHB by Jan 30, the people said. The delay may hamper a long-planned RM10 billion ($3 billion) initial public offering of 1MDB power assets, designed to help cut the firms RM42 billion ($11.8 billion) borrowings. The missed payment comes as 1MDB reshuffles management. On Monday it hired an Abu Dhabi-based Malaysian investment banker, Arul Kanda (left), as its new president and group executive director. Kanda succeeds former chief executive officer Mohd Hazem Abdul Rahman, who departed less than two years after his appointment, amid criticism for leading the company into further debt. With Prime Minister Najib Abdul Razak chairing its advisory board, 1MDBs inability to settle the loan payment hit the firms bonds and fuelled investor concerns about Malaysias economy, economists said. Already hit by worries over falling crude oil prices, the Malaysian currency extended its slide against the dollar on Tuesday to its lowest since July 2009. 1MDB will be a bit of a catalyst of the ringgit weakening... The concerns are whether the sovereign itself will have to take up the liability, said Wellian Wiranto, an economist at OCBC Bank in Singapore. The spread on a 1MDB $3 billion bond, due 2023, moved out 55 bps to 310/290 bps over US Treasuries, the widest since its issuance in March 2013 as investors absorbed the impact of the payment delay. Officials at 1MDB declined to comment. The people familiar with the situation spoke on condition of anonymity as the matter was still private. 1MDBs borrowings amounted to RM41.9 billion ($11.8 billion) as of March 31, 2014, according to its most recent financial statement. Though 1MDB is a state investor, Malaysian authorities have said the country has provided an explicit guarantee on only 5.8 billion ringgit of the funds loans. The RM2 billion loan that is now due to be repaid by end-January is part of a bigger debt taken on by its Powertek Investment Holdings Sdn Bhd unit in May. It was designed to refinance a 6.17 billion bridging loan taken out in 2012 to part finance the purchase of power assets.
Posted on: Tue, 06 Jan 2015 13:43:50 +0000
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