‘Redeemed’ Cayman Island funds to pay off 1MDB debt interest, CEO says

Arul Kanda, in clearing the air over the movement of the recently redeemed funds, said it was only ‘sensible’ that the money stays in US dollars. ― Reuters pic
Arul Kanda, in clearing the air over the movement of the recently redeemed funds, said it was only ‘sensible’ that the money stays in US dollars. ― Reuters pic

KUALA LUMPUR, Feb 7 — 1 Malaysia Development Berhad (1MDB) will not repatriate the US$1.103 billion (RM3.91 billion) it redeemed from its Cayman Island investments, CEO Arul Kanda Kandasamy has confirmed, as the money will be used to service the firm’s debt interest payments.

In a report today in Singapore’s Business Times, Arul Kanda, in clearing the air over the movement of the recently redeemed funds, said it was only “sensible” that the money stays in US dollars.

“There’s a very sensible and simple reason for that. We are keeping the money in US dollars as we have US$6.5 billion (RM23.06 billion) in bonds out there, in which interest payments come up to nearly US$400 million (RM1.4 billion) a year,” he was quoted saying in the report.

Explaining further, Arul Kanda said this US$1.103 billion is the second tranche of funds in 1MDB’s Cayman Islands foray, which totalled US$2.32 billion (RM8.23 billion).

He said although the entire sum has been redeemed in full, only the first tranche of US$1.22 billion (RM4.33 billion), which was redeemed last year, has been repatriated.

“The cash is in our accounts and in US dollars. I can assure you (about that)... I have seen the statements,” Arul Kanda said, according to the Business Times.

But he added, “People need to understand that the first tranche has been fully spent.”

Arul Kanda said according to the notes to 1MDB’s latest accounts, it was revealed that the redemption proceeds from the first tranche were “substantially utilised” in September last year to service the debt interest payments, working capital as well as payments to Abu Dhabi’s Aabar investments — estimated at RM830 million.

“(Secondly), I said the remaining (second) sum has been redeemed. I never said anything about repatriation of funds,” the 1MDB CEO pointed out in the report.

“Everyone has an agenda... they have conveniently misrepresented what I had said,” he reportedly added.

He is believed to be referring to opposition leaders here who have repeatedly demanded clarification from the sovereign wealth fund over reports of its full redemption of its Cayman Islands investment.

Last month, international newswire Reuters reported 1MDB as saying in a statement that it had redeemed its Cayman Islands investment in full.

According to Reuters, 1MDB had previously redeemed US$1.2 billion (RM4.28 billion) of the funds invested by a company registered in the Cayman Islands, and has repatriated the remaining US$1.1 billion (RM3.92 billion).

But in response, DAP’s Tony Pua demanded that Arul Kanda explain what he meant by “redemption” and asked if the proceeds from the investments has been received in full.

He said Arul Kanda’s statement was short on details and cited a KiniBiz report that said his statement did not specify where the money was.

“It will certainly raise the public’s confidence in 1MDB if the new CEO could be more specific if by ‘redeemed’, he meant that the proceeds from the disposal of the investment in Cayman Islands have already been ‘received’ by 1MDB,” Pua said on January 15.

The DAP publicity chief also called on Arul Kanda to confirm the actual amount that 1MDB had received in cash.

“Such disclosure will certainly go a long way towards lifting the veil of secrecy over the various mysterious actions of the company over the past five years,” said Pua.

1MDB, a brainchild of Prime Minister Datuk Seri Najib Razak, has come under intense opposition scrutiny following revelations of its growing debt pile.

Financial daily The Edge recently reported that the investment arm, which started as Terengganu’s oil investment fund, had failed to pay a short-term debt amounting to RM2 billion, prompting warnings of a rating downgrade.

But Bloomberg has reported Arul Kanda as defending the investment company’s credentials, insisting that it has been a “responsible borrower”.