RM2 billion Repayment - Can Maybank Clear The Air?

Yesterday Tun Dr Mahathir asked in which bank has 1MDB placed that RM8.0 billion (?? give or take a few ok) they say they have brought back from the Cayman Islands.

This is another way of saying "Is that money deposited in any of our domestic Malaysian banks?" Because it is a Malaysian owned sovereign fund, using taxpayers' funds. Our money. Put it back inside the Malaysian banking system.

RM2.0 billion or so of that money has to be used to pay back Maybank and RHB Bank. Talk is the deadline is by 31 January 2015. 

But why wait for the deadline. Normally when funds are overdue the banks will or should charge some type of penalty or late payment fee. 1% of RM1 billion is RM10 million. Half percent is RM5.0 million. These are big numbers. Why wait till the last minute to pay the banks?

If they have paid Maybank and RHB Bank, can either Maybank and RHB confirm that they have been paid? I know about BAFIA and client confidentiality but this is a sovereign fund lah. Taxpayer funded. Everyone is watching this monster. So how about some confirmation from Maybank?  When I was in Maybank it was still a solid bank.

Here is some news from the Middle East about 1MDB. Looks like the arabs are also getting worried.

Here is the same news taken from the Gulf Times here

Mideast investments at stake as Malaysia debt concerns mount

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Pedestrians seen at the business and banking district in Kuala Lumpur (file). Critics argue that debt-ridden investment fund 1MDB has become a “threat

11:37 PM

14 January 2015

 

By Arno Maierbrugger/Gulf Times Correspondent Bangkok


Mounting troubles at Malaysia’s government-owned strategic investment company 1Malaysia Development Berhad, or 1MDB, which has a focus on promoting foreign direct investment in Malaysia, have caused alarm bells ringing for two of its main investment partners from the Middle East, the Qatar Investment Authority and Abu Dhabi’s Aabar Investment.  

1MDB was up in 2009 by Malaysian Prime Minister Najib Razak “to drive strategic initiatives for long-term economic development”  in Malaysia and has been focused on development projects in the areas of energy, real estate, tourism and agribusiness.

But  lately more on high-profile projects which came under fire from opposition politicians and media such as the Tun Razak Exchange,  a new financial district in Kuala Lumpur named after Najib Razak’s father and partly funded by Aabar, and the 200-hectare Bandar  Malaysia project, an integrated urban development also in Kuala Lumpur, of which one of the partners is the QIA. 

The value of  Middle Eastern investment in these two projects alone is $8bn: Qatar has pledged $5bn for Bandar Malaysia, and Aabar has raised  $3bn through its 50:50 joint-venture with 1MDB called Abu Dhabi Malaysia Investment Company.

However, both projects are way behind schedule, and the Middle East partners have reportedly become displeased with the lack of   transparency in sharing 1MDB’s plans and strategies with investors, as well as with delays that are causing financing costs to  rise. 

According to sources quoted by various Malaysian newspapers, both Qatar and Abu Dhabi are considering to step back from the  projects, as is an Islamic bank from Kuwait, reportedly Kuwait Finance House, and US-based Insurance company Prudential.

Things became worse for 1MDB when the fund missed a loan-repayment of $563mn due end-December 2014 to Malaysian Banks Maybank and RHB, causing concerns that the fund might have trouble to manage its total borrowings of $11.8bn. 

1MDB also had to repeatedly delay the planned initial public offering of its power plant unit which was expected to reduce the fund’s debt burden. However, a  longer-than-expected due diligence process and debt refinancing negotiations lead to another delay.

Early January, Mohd Hazem Abdul Rahman, 1MDB’s managing director and chief executive officer, stepped down after less than two  years in the position. He has been under fire for the huge debts the fund accumulated, as well as for certain investment  decisions and high fees for consultants. 

Rahman was replaced by Abu Dhabi-based Malaysian investment banker Arul Kanda, formerly  executive vice president and head of investment banking at Abu Dhabi Commercial Bank. 

It is quite obvious that the decision to replace the CEO with an experienced Abu Dhabi banker was driven by 1MDB’s strategic  partners in the Gulf after rumours of a possible default of 1MDB started spreading.  

“It would upset lot of people including Malaysia’s strategic partners in the Middle East if a default happens,” the Malaysian   Insider newspaper quoted a Singapore banking source as saying. 

Critics argue that the debt-ridden investment fund has become a “threat” to Malaysia’s entire financial system where 45% of  sovereign debt is being held by foreign creditors, mainly in sukuk and other Islamic financial instruments. 

Foreign investors  also have started to worry about the sovereign credit rating of the country which is currently A3/A- but could possibly drop to  the level of Thailand’s Baa1/BBB+ in case of continued refinancing problems of 1MDB or even a necessary bailout by the  government. This would be a huge embarrassment for Malaysia’s prime minister who is also chairman of 1MDB’s board of advisers.

Folks, lets put it this way lah. If 1MDB defaults with so much debt on its plate all the s**t in the world will hit Malaysia.

If Malaysia's credit ratings drop from A3/A- (which is still a solid rating) down to Baa1/BBB+ it means that ALL our government bonds (Treasury bills), government sukuk and to an extent even our private bonds issued overseas by our private companies will suffer a beating. The country as a whole will have to pay a higher interest rate for its foreign borrowings.

If this happens it will cost us plenty. Plus it will stay that way for a while. Ratings dont just jump back in a couple of weeks or months. 

Not to mention the amount of bad debt that will hit our banking system.

How did we get to this point? If they say that behind every successful man there is a woman, then is there a witch behind every bungling idiot?