TALK about another turn in the twisted debt saga of 1Malaysia Development Berhad (1MDB).

Former Selangor menteri besar Abdul Khalid Ibrahim today said a 1MDB briefing by company president Arul Kanda Kandasamy revealed that the scandal-hit state investor did not repay a loan from Abu Dhabi’s International Petroleum Investment Co (IPIC) as the monies were already paid to the fund’s subsidiary, Aabar BVI.

“The settlement to IPIC was not enforced as 1MDB paid to Aabar BVI, a wholly owned subsidiary of IPIC. However, the payment was not transmitted to the parent entity. 

“Fortunately, 1MDB had been able to prove the agreement made between the two parties and the arrangement is now on track,” Khalid wrote in notes he took down during the briefing to PAS lawmakers last Tuesday.

Khalid, the independent MP for Bandar Tun Razak, was invited for the briefing in capital Kuala Lumpur.

But Abu Dhabi’s IPIC and its subsidiary Aabar Investments PJS said in a joint statement in April 2016 that the BVI firm with an almost identical name, Aabar Investments PJS Ltd, “was not an entity within either corporate group”.

They had neither received any payment from the BVI company, which was wound up in June 2015, nor assumed any liability on its behalf, it added.

Second Finance Minister Johari Abdul Ghani also revealed the existence of a letter last year confirming that Aabar Investments PJS Ltd (BVI) is an IPIC unit although the sovereign wealth fund had denied it.

But Khalid did not disclose the reasons for 1MDB agreeing to pay IPIC despite saying the money was sent to the Aabar BVI firm.

1MDB has until August 12 to pay part of the US$603 million (RM2.6 billion) owed to the IPIC. This was the condition for extending the full payment deadline from July 31 to August 31. 

On April 24, 1MDB reached a settlement with IPIC to pay the latter US$603 million on July 31. The state investment fund, however, failed to meet the deadline and has now been given until Friday to pay part of the sum owing.

Khalid said 1MDB has also been advised by its lawyers to ignore the legal drama involving the US Department of Justice’s (DoJ) move to seize assets bought with money allegedly stolen from the state investment fund.

He said 1MDB’s Arul Kanda told them that no monies nor assets belonging to the company or its subsidiaries were involved. 

“In any case, the idea of the US trying to save Malaysians of their assets is akin to the argument that the US was trying to save the world from weapon of mass destruction by bombing Saddam Hussein and the people of Iraq. 

“When it concerns the US, there is no such thing as a free lunch,” he added. 

Khalid said Arul Kanda briefed those present on the current financial position, which showed the balance sheet of 1MDB following the restructuring plan enforced by the management. 

“In conclusion, the net present value of the assets owned by 1MDB was able to service its current and future liabilities and resulting in a surplus. 

“To avoid future complications in operating the assets of 1MDB, these assets were to be transferred to MOF Inc as owners – as per the restructuring plan. 

“1MDB is to make the appropriate payment of the debts as and when the income and gains from assets transactions by MOF Inc flow to 1MDB,” he said, adding that the restructuring management of 1MDB must ensure the current net present value of the assets continues to be maintained so that there will be no disruption in servicing the debts and commitment. 

“The value of the assets of 1MDB should be much more than the current net assets value as the transaction was embarked outside 1MDB – no thanks to the bad political publicity it has been receiving.

“Given this scenario that restructuring is in good progress, the issue of bailing out 1MDB is irrelevant,” Khalid added.

From the roundtable, Khalid said managed to establish that 1MDB operated on a low or small equity capital while relying on leverage financing to support its investment with capital gain potential in medium term – riding on social and political support from the government to enhance value and profitability for its projects.

“The main challenge faced by the company is its obligation to service the interest payment while the project is in its initial and development stage.

“It was easy to appreciate that 1MDB has paid over US$10 billion in interest at the back of RM10 million of equity capital and until today, it still manages to service these debts and financial commitments.

“But the political drama – coupled with the distribution of distorted facts and false information especially in social media network – had painted a picture that 1MDB was in a disarray and being used to finance political activities,” he said. – August 9, 2017.