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KUALA LUMPUR, Oct 30 — Sovereign wealth fund 1 Malaysia Development Berhad today denied allegations that it was recklessly building up over RM37 billion in debt and impropriety in the commissions it paid for bond and fund-raising.
In a statement on its website, 1MDB said that its ability to raise funds from quality investors showed the confidence vested in the firm, also pointing out that it had never missed any scheduled payments to its borrowers.
“All of our debt is backed by solid assets, and the total value of our assets (RM44.67 billion as at the financial year end of March 2013), comfortably exceeds the value of our total debts (RM37 billion for the same period),” it said in a lengthy statement in reply to concerns over its growing debt, which has attracted the attention of former prime minister Tun Dr Mahathir Mohamad.
1MDB also clarified that the relatively higher annual interest rate of 5.75 per cent it was paying for a RM5 billion Islamic bond was due to its long maturity period of 30 years, saying it was “unfair” to compare it with Petronas’s 3.60 per cent interest rate for a smaller amount and shorter tenure period it was borrowing — with the bond being for RM100 million and three years.
It also dismissed claims that part of the RM5 billion bond’s 5.75 per cent interest rate was paid to “middle-men”, labelling it as a “serious allegation” and “unsubstantiated speculation”, while insisting that the whole interest was paid to its bondholders twice a year as scheduled.
Earlier this week, The Edge financial weekly reported that 1MDB took a 10-year-loan of US$1.75 billion (RM5.6 billion) in 2012 and another for US$3 billion in 2013, for which the firm allegedly paid US$196 million and US$283 million in commissions, respectively.
“With respect to the aforementioned transactions, we have noted with concern the insinuation that Goldman Sachs may have made payments to third parties, an allegation that we deny in unequivocal terms,” 1MDB said.
Citing Goldman Sachs, it also said no commission fees were paid to third parties by either firms save for legal and accounting services rendered.
The six-year-old sovereign wealth fund also denied today that it was given any preferential treatment when bidding for power plant projects, saying that it has a good track record and is also the country’s second largest independent power producer, adding that it had lost to rival Tenaga Nasional Berhad (TNB) in two projects despite offering a lower price.
The fund 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, changing auditors.
1MDB, the brainchild of Prime Minister Datuk Seri Najib Razak, was set up to help drive Putrajaya’s strategic investments.