A WITNESS admitted in court today that he was wrong in believing that Najib Razak wanted the Terengganu Investment Authority to issue a RM5 billion bond.

Ismee Ismail, the former director of 1MDB said that his “perception” based on Najib’s intonation and reaction was wrong after being shown a letter by the defence team.

Najib is standing trial for corruption over the misappropriation of RM2.28 billion in 1MDB funds.

He faces 25 charges – four for abuse of power and 21 for money-laundering – for offences committed between 2011 and 2013.

Defence lawyer Hariharan Tara Singh showed Ismee a letter dated May 28, 2009, in which Najib agreed with Terengganu ruler Sultan Mizan Zainal Abidin to discontinue the issuance of RM5 billion in Islamic medium-term notes (IMTN).

“Would you agree, based on this letter, Najib himself agreed to withhold the bond issuance?” Hariharan asked.

“Would it be right to say that Najib was not pushing for the issuance despite your assumption?”

Ismee agreed with the lawyer that he was wrong.

“Yes. In this case, my perception was wrong.”

In his witness statement, Ismee said his perception was that Najib wanted the bond issuance to proceed, based on his reaction and intonation, after informing the former prime minister of the sultan’s decision.

Ismee said Najib had asked him why he signed a resolution agreeing to discontinue the issuance. The witness said that it was the sultan’s instruction, there was nothing he could do.

Another witness, former 1MDB CEO Shahrol Halmi also testified that he had proceeded with the issuance, despite the sultan’s instruction.

Shahrol said that, after explaining to Najib what happened with Sultan Mizan, Najib said: “You go ahead, I will talk to tuanku.”

Shahrol said, at the time, he took this as a mandate from Najib, who was prime minister and finance minister, to carry on.

As finance minister, Najib was also responsible for the government guarantee for the bond issuance.

Despite resistance from the sultan and the TIA board of directors, TIA went on to issue the bonds with AmInvestment Bank Bhd acting as the lead arranger, lead manager and facility agent.

The federal government agreed to guarantee the principal and interest of the notes for a 30-year period at an interest rate of 6.68% per annum.

The bonds were issued at a 12.08% discount to ensure full subscription, resulting in TIA receiving RM4.39 billion from the full value of RM5 billion, a shortfall of RM615 million.

The interest rate on the coupon was 5.75%, meaning that the effective return to bondholders amounted to 6.68% per annum.

In total, 1MDB would have to fork out RM13.6 billion to repay the notes, RM5 billion in principal and RM8.63 billion in profit payments.

The bonds raised by TIA were eventually used by 1MDB for a 40:60 joint venture with PetroSaudi Holdings (Cayman) Ltd, dubbed 1MDB PetroSaudi Ltd, which is the subject of the current trial.

The 1MDB trail will continue on March 21. – March 17, 2022.