Samurai bond to help settle 1MDB debts

PETALING JAYA: The RM7.4bil Samurai bond issuance, which the Japanese government has offered to guarantee, may involve settling 1Malaysia Development Bhd’s (1MDB) debts.

Maybank Kim Eng said in a report that the proposed bonds, which was announced at Budget 2019 last week, would be used to retire some of the country’s costly loans.

“We think this could mean 1MDB dollar debts, which are now considered as committed government guarantees. The 1MDB Energy Ltd dollar bonds currently pay a costly 5.99% coupon, with US$1.75bil (RM7.3bil) equivalent outstanding, close to the Samurai bond proceeds.”

According to Bernama, the Samurai bond is currently being discussed further at the bilateral meeting between Prime Minister Tun Dr Mahathir Mohamad and his Japanese counterpart, Shinzo Abe.

The three-day working visit to Japan kicked off on Monday.

Bernama reported yesterday that Dr Mahathir had expressed his gratitude to Abe and his government for their help in easing Malaysia’s financial woes.

Dr Mahathir said Abe and his government had adopted a very positive attitude towards Malaysia’s financial pressures and the actions it had taken.

“Prime Minister Abe also assured us that if in future there is a need to seek Japanese support in solving our financial problems, he is ready and the Japanese government is ready to consider.”

It was announced in the budget that the Japanese government had guaranteed 200 billion yen of 10-year Samurai bonds, via Japan Bank of International Cooperation, at an indicative coupon of 0.65%.

The bond will be issued before March next year.

Abe also said the yen credit is feasible with the focus on transportation, education and human resource development.

The Japanese Prime Minister said a team of experts from Japan’s railway companies would be dispatched to Malaysia at the end of this month as part of a study towards the objective.

“I told Dr Mahathir that Japan will study, with Malaysia, the possibility of extending yen loan with a primary focus on transportation, education and human resource development. I hope this study will lead to concrete cooperation in future,” Abe was quoted as saying in Bernama’s report.

Malaysia had asked for yen loan during Dr Mahathir’s first meeting with Abe in June to help resolve the Malaysian government’s debt.