Finance Minister Lim Guan Eng continued his war of words with former prime minister Najib Razak, calling the rescue of 1Malaysia Development Bhd the largest government bailout in history.

Lim today rebutted Najib’s claim that the ministry’s payments of 1MDB debts could not be called a bailout since the government had taken over the firm’s assets.

The debt payments were still “tantamount to a bailout” because the ministry took over the firm’s assets file to develop them in order to meet its liabilities.

Lim also showed how around RM7 billion that had been paid so far on behalf of 1MDB were related to borrowings completely unrelated to the assets it took over.

These assets were the Tun Razak Exchange and Bandar Malaysia property projects that had been started by 1MDB, which is Najib’s brain child.

“There could be no other description for the RM6.98 billion worth of payments by the Finance Ministry on behalf of 1MDB to date, other than the single largest bailout in history carried out by the government of Malaysia,” Lim said in a statement.

1MDB has been the subject of money laundering and graft probes in six countries, which are looking into how funds were siphoned from the firm and into the bank accounts of individuals believed to be associated to Najib.

Najib, who headed 1MDB’s advisory board, has been questioned by the Malaysian Anti-Corruption Commission (MACC) over these allegations. He maintains he did nothing wrong.

On Friday, Najib argued that 1MDB transferred its assets to the ministry, which in return paid the company’s debts.

Had 1MDB kept those assets, it could develop them and pay its debts on its own, Najib had said.

Lim refuted this, saying that the RM6.98 billion the ministry had paid so far on behalf of 1MDB were interest payments for four bonds, three of which were unrelated to those assets. They are:

1. Coupon interest of RM5 billion for 30-year bonds issued in 2009. This was mainly used for 1MDB’s failed investment with PetroSaudi International Limited.

2. Coupon interest for US$3.5 billion (RM14 billion) worth of 10-year bonds issued in May and October 2012. These were intended for the acquisition of power plant assets. These assets have been disposed of and their proceeds completely utilised, but the bonds remain outstanding in 1MDB.

3. Coupon interest for US$3 billion of 10-year bonds issued in March 2013. Although the funds were intended for the development of TRX, the auditor-general said they were never used for the project.

4. Payment for the US$1.2 billion advance from Abu Dhabi’s International Petroleum Investment Corporation (IPIC), taken in April 2015. It was to repay US$975 million of borrowings from a Deutsche Bank-led consortium.

“Therefore, why should any returns from the real estate projects – land which were originally acquired cheap from the government – be used to cover up the financial holes created by all of 1MDB’s other financial misadventures and shenanigans?” Lim said.

In addition to the above payments, Lim said the ministry had made other payments to or on behalf of 1MDB with regards to TRX and Bandar Malaysia. These are:

1. RM250 million via wholly-owned subsidiary Aroma Teraju Sdn Bhd, for 0.94ha of land from TRX in September 2015.

2. A RM741 million deposit refunded to the consortium led by Iskandar Waterfront Holdings Sdn Bhd after the Bandar Malaysia sale and purchase agreement was terminated in May last year.

“This was because 1MDB had used up the deposit for other purposes and did not have the money to refund the deposit,” Lim said.

He further refuted Najib’s argument that 1MDB’s debt payments were compensation for taking over the company’s assets.

“Let me also remind the former prime minister that the Finance Ministry did not take over these entities ‘for free’.”

The ministry’s takeover of TRX City Sdn Bhd included a RM800 million loan from the Social Security Organisation that is due in 2020.

The Bandar Malaysia project also came attached with a RM2.4 billion sukuk, to be repaid from 2021 to 2024.

“It should also be noted that the auditor-general confirmed the above borrowings were not used for their original purposes, which were the development of the above projects.

“1MDB president Arul Kanda Kandasamy also confirmed this himself when he testified to the Public Accounts Committee.

“Hence, if anything, the Finance Ministry should be claiming compensation from 1MDB for also assuming these liabilities, not the other way around.”

Lim added that the parcels of land for both projects were originally sold by the government to 1MDB at bargain basement prices between 2010 and 2012.

The 70-acre TRX plot was sold to 1MDB for RM230 million, or approximately RM74 per square feet (psf). The 486-acre Bandar Malaysia was sold to 1MDB for RM1.6 billion, or approximately RM72 psf.

Even while the ministry was paying 1MDB’s debts, the firm made “ludicrous” profits from the sale of two parcels of TRX land to government-linked entities, Lim said.

These were the RM188.5 million, or RM2,750 psf, for 1.57 acres sold to Lembaga Tabung Haji in April 2015, and RM255 million, or RM4,680 psf, for 1.25 acres sold to Affin Bank in August 2015.

Affin Bank is a subsidiary of Lembaga Tabung Angkatan Tentera. – May 27, 2018.