RESTRUCTURING PLAN ‘GOING WELL’

Issue of bailing out company is irrelevant, says ex-Selangor MB

FORMER Selangor Menteri Besar Tan Sri Abdul Khalid Ibrahim said the issue of 1Malaysia Development Bhd (1MDB) bailout is irrelevant, given the firm’s restructuring is progressing well.

Khalid, who attended Pas’ roundtable discussion on 1MDB recently, said he was convinced that the company’s debt restructuring, initiated by chief executive officer Arul Kanda Kandasamy and its board members, was working.

“1MDB operates 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,” Khalid wrote in Free Malaysia Today.

“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.”

Khalid noted that it was easy to appreciate that 1MDB had paid over US$10 billion (RM42.9 billion) in interest on the back of RM10 million of equity capital and until today, still managed to service these debts and financial commitments.

He noted that Arul had briefed on the current financial position and showed the participants 1MDB’s balance sheet following the restructuring plan.

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

“The restructuring management of 1MDB must ensure for the current net present value of the assets continue to be maintained so that there will be no disruption in servicing the debts and commitment. And, of course, the value of the assets of 1MDB should be much more the current net assets value as the transaction was embarked outside 1MDB — no thanks to the bad political publicity it has been receiving.”

Khalid said given this scenario, the restructuring was in good progress and the issue of “bailing out 1MDB is irrelevant”.

He stressed that in the meeting, Arul stated that no monies or assets belonging to the company or its subsidiaries was involved as indicated by the US Attorney General’s efforts in securing assets belonging to Malaysia, during which 1MDB was said to be involved in the alleged illegal transactions.