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Sunday, 14 June 2015

No immediate danger: 1MDB to be resolved within two to six months. Process already started.

Prime Minister Datuk Seri Najib Razak today promised Umno leaders and pro-establishment non-governmental groups that he would solve controversies surrounding 1Malaysia Development Berhad (1MDB) in two months, at the earliest.

Najib said so during a closed door session with Umno division information chiefs and NGOs at the Putra World Trade Centre (PWTC) today, according to one of the attendees.

Najib had made this pledge and given a timeframe of between two to six months.. "Earliest is two months, but at any rate, he said he will solve it by the end of the year,"

What else to say about the following except "should have done this much earlier"
Meanwhile, Umno Youth information committee member Rozaidi Jamil said that if Najib had explained such details earlier, many of the controversies surrounding 1MDB would not have taken place.
"What was explained was very clear. If this was explained before this, we would understand. Why wasn't it answered before?" Rozaidi said.
Back to the 1MDB restructuring..

In fact, this progress have already started as reported by The Edge on their cover story last week  where they reported on the IPIC-1MDB asset-debt swap arrangement in the same story where they also had to admit the USD1 bil units existed.
The Edge forced to exist that the infamous BSI "units" have value and not worthless or fake.

Also, Have a look at the picture which I adapted from The Star.

1MDB loans - No longer in immediate danger until the year 2023 at the earliest

The first half of the picture from The Star was widely shared a few weeks ago with people saying that this is a sign that 1MDB is going into big problems.

You can clearly see that this year was a critical year where RM5b of interest and principle repayment was needed - comprising of RM3.6b Deutsche bank loan and RM1.4b of interest for all the accumulated loans.

But 1MDB have already announced last week that this RM3.6b has been paid last week and 1MDB has also paid off all interest costs to date -  including fully settling RM600mil Ambank loan due in April and settling a RM550mil  1MDB RE loan due in January.

This means that 1MDB is no longer in danger of going bankrupt in 2015 anymore as property sales and IPP profits have been helping.

In fact, the IPIC-1MDB asset swap could be completed between two to 6 months and hence completely eliminating 1MDB's largest loan, the USD3.5 bil by swapping about USD3.5 bil financial assets with IPIC taking over the loan.

This would mean annual interest savings of RM750mil per year (5.99% pa on the USD3.5b) until the year 2023.

This elimination of debt and reduced interest is reflected in the bottom half of the picture - which means the next danger point would only be in the year 2023 - eight years away (Tun M will be 98 years then).

Hence, I have revised the bottom half of the picture to reflect these changeds.

Note: The future developments i am describing now is not reflected in my picture.

However, it has been reported that this year 2023 loans will be resolved by the sale or listing of Edra Energy - a process which is underway.

If that is settled, the next danger point would be in the year 2039 (Tun M will be 114 years old and Najib will be 86 years old then) - but this is also being addressed by the RFP recently called by 1MDB for equity participation in the TRX and Bandar Malaysia projects.

This is necessary since these projects have always been funded using 100% borrowings and an equity injection is necessary to provide balance and reduce risk.

Looks like the MOF and 1MDB and Najib have done a good job in their restructuring plans so far.

It looks very likely that within the next few months, 1MDB won't be a potential danger or an issue anymore.

1 comment:

  1. No it would still be a danger at least according to Tun's M people. And they will ask the questions again and again. One of it is who is Jho Low? What is his role in 1MDB? Why did 1MDB acquired the soon to be expired concessions of IPP company. Why did 1MDB paid too much in interest for its bond? How much is the commission paid to GS? The irony is most of these questions are already been answered by 1MDB in their FAQ and by PM himself. What to do?