1MDB settles debt to UAE fund

KUALA LUMPUR: Scandal-ridden state fund 1Malaysia Development Berhad (1MDB) paid an Abu Dhabi sovereign wealth fund some US$300 million (9.96 billion baht) on Wednesday as part of a debt settlement to avoid a potentially embarrassing arbitration proceeding.

Under the settlement agreed on in April, 1MDB was to pay International Petroleum Investment Company (IPIC) $1.2 billion plus interest in two tranches — half on July 31 and the balance on Dec 31.

But 1MDB failed to come up with the money, about $602 million plus additional $26 million in late payment interest, on July 31 and again after the five-day grace period allowed under the agreement expired.

IPIC then gave 1MDB until Aug 12 to pay at least $310 million, with the balance due yesterday.

The Malaysian state fund paid $350 million on Aug 11 and announced Wednesday that it has “remitted to IPIC in full the second tranche due on Aug 31, 2017”.

“All funds were paid from proceeds of the ongoing rationalisation programme,” it said in a statement.

London-listed IPIC confirmed in a statement to the London bourse that it has received the funds.

1MDB agreed to a settlement in April in order to avoid arbitration proceedings that IPIC and its unit Aabar Investments PJS initiated in June last year with the London-based Court of International Arbitration for a total claim of $6.5 billion.

Besides paying IPIC some $1.2 billion, IMDB undertook to assume responsibility for all future interest and principal payments of two 10-year bonds totalling $3.5 billion that IPIC co-guaranteed in 2012 for the acquisition of two power companies. IPIC guaranteed the bonds plus $2 billion in interest.

1MDB is locked in dispute over its debt obligation to IPIC. The Abu Dhabi fund had lent to and co-guaranteed billions of dollars of 1MDB debt since 2012. The deals between the two state funds have been subjects of investigation stretching the globe for money laundering and fraud.