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Saturday, January 10, 2015

Troubled 1MDB loan poses conundrum for Ananda’s Usaha Tegas

A power plant under the Tanjung Energy stable. The power-generation company was purchased by 1MDB from Usaha Tegas but the former's possible default of a loan taken for the purchase could see as much as 80% of Tanjung Energy return to its original owner. – January 10, 2015.A power plant under the Tanjung Energy stable. The power-generation company was purchased by 1MDB from Usaha Tegas but the former's possible default of a loan taken for the purchase could see as much as 80% of Tanjung Energy return to its original owner. – January 10, 2015.A souring loan taken by state-owned 1Malaysia Development Berhad (1MDB) from two local banks is presenting tycoon T.Ananda Krishnan with an awkward dilemma that could put pressure on his group’s close ties with Prime Minister Datuk Seri Najib Razak’s administration, The Edge Review reports.
The digital financial weekly said the tycooon’s problem stems from a RM5.5 billion financing facility 1MDB received from Maybank and RHB Bank for the purchase of Tanjung Energy, a cash-rich power-generation company, from Ananda in March 2012.
The weekly, in its INFORMER column said, financing for the deal came in two tranches from Maybank and RHB. The first tranche of RM3.5 billion is a 10-year facility that is backed by cash-flows from the clutch of power-plants owned by Tanjung Energy.
At issue is the second tranche; a 2-year RM2 billion facility, which the banks demanded guarantees from Ananda’s privately-owned holding company, Usaha Tegas Sdn Bhd, before extending the loan to 1MDB.
The weekly reported that as part of the complex funding exercise, bankers close to the situation say Usaha Tegas entered into a separate arrangement with 1MDB that included several penalty clauses, including one which gives Ananda’s private concern rights to part of the power assets should the state-owned sovereign fund default on the loan facility.
It said the second tranche of the loan facility was due in March last year. But 1MDB sought and received several extensions with the last one due in end-December.
The report said the fund failed to settle the loan and bankers close to the situation say that Ananda’s Usaha Tegas could now end up with as much 80% of the power assets should it chose to exercise its rights.
Financial executives say that both 1MDB and Usaha Tegas are currently in talks to resolve the matter.
The report said 1MDB can’t afford to lose control of Tanjung Energy, which has 13 power plants in six countries and a total generating capacity of just under 4,000MW.
Tanjong's power assets, which generate about RM1 billion in earnings annually, is a major source of cash flow for 1MDB, which has emerged as one of the country’s most indebted companies with borrowings of roughly RM38 billion.
Separately, 1MDB is also under pressure from Maybank and RHB, which are both state-controlled entities. Bankers say that the two banks have given 1MDB until the end of January to settle the loan.
Should 1MDB fail to meet the deadline, both banks will be required to make provisions for the souring loan, a move that could have a sharp knock on earnings. – The Edge Review

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