Exclusive: Malaysia's 1MDB to be dismantled under debt plan - sources

Thu Mar 5, 2015 9:07am EST
 
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By Praveen Menon and Yantoultra Ngui

KUALA LUMPUR (Reuters) - Malaysia's indebted and controversy-ridden state investor 1MDB will be left as a skeletal structure and possibly dissolved under a debt repayment plan in which most of its assets will be sold, sources with direct knowledge of the matter said.

The power and property fund, a pet project of Prime Minister Najib Razak with assets worth $14 billion, was hit by losses last year and nearly defaulted on a loan payment. The near-miss drove down the ringgit currency MYR= and Malaysian government bonds and prompted calls from opposition leaders to make the fund's accounts more transparent.

The state fund's 42 billion ringgit ($11.6 billion) debt includes a $3 billion bond sale in 2013 that was one of the largest global issues from Southeast Asia.

Under the aggressive restructuring plan, crafted by new boss Arul Kanda and blessed by the government, the fund will sell 80 percent of its power unit Edra Energy via a stock market listing, three sources with direct knowledge of the situation told Reuters.

More than 18 billion ringgit of 1MDB's debt linked to its power assets would go under Edra Energy ahead of the listing, which is due to be kickstarted in 6-9 months time, the sources said.

The fund, which has Najib as chairman of its advisory board, will also sell the bulk of its land assets and stakes in two high-profile property projects, Tun Razak Exchange (TRX) and Bandar Malaysia, after splitting them into separate entities, as already partially indicated in a strategic review unveiled last month.

The Finance Ministry, which is headed by Najib and is the sole owner of 1MDB, did not respond to a request for comment.

  Continued...

 
A man walks past a 1 Malaysia Development Berhad (1MDB) billboard at the funds flagship Tun Razak Exchange development in Kuala Lumpur, March 1, 2015. REUTERS/Olivia Harris