STATE investor 1Malaysia Development Bhd was already severely in debt in March 2013 when it decided to raise US$3 billion to finance the Tun Razak Exchange project, the high court heard today.

This was revealed by former 1MDB chief executive Shahrol Azral Ibrahim Halmi during cross-examination by Najib Razak’s lawyer, Wan Aizuddin Wan Mohamad, in the former prime minister’s graft trial.

Shahrol said 1MDB was RM10 billion in debt at the time and its board did not agree to another loan, but went ahead with it after it was pushed through by financier Low Taek Jho, better known as Jho Low.

Wan Aizuddin: How much debt was 1MDB carrying at that time?

Shahrol: I am not sure. I can say with certainty, (1MDB) was already heavily indebted.

Wan Aizuddin: Would you agree 1MDB realised that to get another loan or to issue another note would be difficult?

Shahrol: I agree.

Wan Aizuddin: Wasn’t the board of directors concerned? Despite being so heavily indebted, they still wanted to borrow US$3 billion?

The witness said the deal with Aabar Investments PJS Ltd (Aabar BVI) was pushed through despite the debt because of Low’s involvement.

It later emerged that Aabar BVI was a shell company registered in the British Virgin Islands and controlled by the fugitive businessman, and not an actual subsidiary of International Petroleum Investment Company (IPIC), which should have received the funds.

The joint venture between Aabar BVI and 1MDB ended up not materialising, but was used by the sovereign wealth fund to raise its third bond, arranged by Goldman Sachs, totalling US$3 billion.

Sharol said Low had a habit of forming shell companies with similar-sounding names as established firms to deceive investors.

He said Low insisted that the Malaysian Abu Dhabi Investment Company (Madic) name be changed to Abu Dhabi Malaysian Investment Company Ltd (Admic).

“I can tell you what was represented to me by Jho Low. He came to me and said the Abu Dhabi guys were sensitive as Malaysia came first in the name (Madic). So, I agreed to change it.”

The company later came to be known as Admic, a famous collaboration between UK’s Sky Broadcasting and Emirati politician Sheikh Mansour Zayed Al Nahyan.

Wan Aizuddin: I am suggesting that the change of name to Admic was for the purpose of confusing people, to show that the joint venture for Admic could be Admic Inc in Abu Dhabi?

Shahrol: No comment on that.

Wan Aizuddin: Would you also agree that Jho Low was always in the habit of incorporating offshore companies that have similar names as well-established companies?

Shahrol: Agree.

Low had set up Aabar BVI, mirroring an actual subsidiary of IPIC, as well as Blackstone Asia Real Estate Partners, a shell company seemingly linked to major real estate private equity firm Blackstone Real Estate.

Shahrol said Low got his way with the companies as he was Najib’s confidant.

The former prime minister is being tried on four counts of power abuse to enrich himself and 21 counts of money-laundering involving RM2.3 billion in 1MDB funds.

The trial before judge Collin Lawrence Sequerah continues tomorrow. – August 5, 2020.