KUALA LUMPUR, Nov 12 — Deputy Finance Minister Datuk Ahmad Maslan insisted that Putrajaya’s letter of support for 1Malaysia Development Berhad’s (1MDB) fundraising exercise is not an “explicit guarantee”, sidestepping concerns that the federal government will have to foot the sovereign wealth fund’s debt.

He stressed that the ministry had only given an explicit guarantee amounting to RM5.8 billion to the sovereign wealth fund.

At a press conference at the Parliament lobby today, Ahmad reiterated that the Finance Ministry’s letter of support — published in investment banker Goldman Sachs International’s (GSI) Offering Circular in 2012 and 2013 — only meant that 1MDB has to restructure its assets valued at RM51.41 billion to settle its debt if the sovereign wealth fund  is unable to service its loan according to the stipulated terms.

An explicit guarantee is legally binding under the Loans Guarantee (Bodies Corporate) Act 1965, he explained, under which bondholders can hold the Malaysian government liable in the event 1MDB fails to service its loans.

“A guarantee has to be gazetted and it has been taken into account as the government’s contingent liability, whereas a letter of support, as in the case of 1MDB, is not legally binding and it is not gazetted,” he said.

“In my point of view, there is a very big difference between the two legally and I can assure you that it is not my intention to mislead the august House,” said Ahmad.

He added that 1MDB — which was set up to help drive Putrajaya’s strategic investments — is a successful initiative that is “continuously expanding” and “increasing in value”.

“This is proven with the 64 per cent increase in earnings at the end of March 31, 2014,” said the Pontian MP.

When asked if the government will have to settle 1MDB’s debt in the event the restructuring exercise fails, Ahmad sidestepped this by saying, “There is no way they can’t pay.”

“All existing avenues have to be exhausted for them to settle their US$3 billion loan; if all else fails, then they can restructure their assets... their assets are valued at RM51 billion, I am sure they can manage,” he stressed.

“Even with the RM5.8 billion guarantee, it doesn’t mean 1MDB can get away without settling their debts, the company has a strong financial foundation, which include 15 power plants — of which four are in the country and 11 overseas — and its landbank, which consist of plots of land for the Tun Razak Exchange and Bandar Malaysia,” added Ahmad.

The circular was issued to investors for the purpose of raising US$3 billion (RM10.02 billion) in bonds for 1MDB Global Investment Limited, a wholly owned subsidiary of the sovereign wealth fund.

Opposition MPs contended that the letter of support amounted to a guarantee as in confirms that Putrajaya has agreed to inject necessary capital or make payments on behalf of 1MDB to ensure its obligations are met.

Earlier today, The Edge Financial Daily reported that Ahmad had conceded that the federal government will step in to meet the US$3 billion obligation of 1Malaysia Development Bhd (1MDB) under the letter of support it gave.

He was reported as saying so in a text message reply to a question posed by the paper and adding that this will happen only if 1MDB itself has made all efforts, including restructuring, to raise money to pay its debts, but is still unable to do so.

The news report had prompted Pandan PKR MP Rafizi Ramli to file a motion to cite Ahmad for contempt after allegedly misleading the Dewan Rakyat over the letter of support issued to 1MDB.

Following the accusation levelled against the deputy minister, Lenggong BN MP Datuk Shamsul Anuar Nasarah said today that he would file a similar motion to cite opposition lawmakers Datuk Seri Anwar Ibrahim and Tony Pua for misleading the House with erroneous facts on 1MDB.

“The Barisan Nasional backbenchers were well briefed by 1MDB and we are aware of the fund’s capability,” said Shamsul, who was also at the press conference.

He added that Anwar, who is also Permatang Pauh MP, and Pua (DAP – Petaling Jaya Utara) had adduced unverified fact over 1MDB Energy and the failure of 1MDB’s subsidiaries to file their financial statements.

“Anwar said that 1MDB was awarded a project worth RM3 billion for RM11 billion through direct negotiation, but it’s not true. There is no such project,” explained Ahmad.

“I would also like to confirm that all of 1MDB’s wholly owned subsidiaries have filed their financial statements to the Companies Commission of Malaysia,” he said rebutting Pua’s claim.

1MDB has been dogged by negative publicity over massive fees paid for bond sales, the near one-year delay in publishing its financial accounts, and most recently, its decision to change auditors.

In its recently submitted accounts for the financial year ended March 2013, 1MDB booked a net loss of RM665.36 million against revenues of RM4.23 billion.