1MDB answers its critics

1Malaysia Develop­­ment Bhd has defended itself against criticism by former prime minister Tun Dr Mahathir Mohamad by addressing various issues, from the Cabinet being unaware of a fund-raising exercise for its start-up in 2009 to events leading to its investments in Cayman Islands increasing to US$2.318bil (RM8.57bil).

The fund that is wholly owned by the Finance Ministry has come under relentless attacks from not only Dr Mahathir but also some ministers for its cash-flow problems in meeting obligations for its debts of RM42bil.

Rebutting allegations that a Cabinet paper was not prepared for the Government guarantee that allowed 1MDB to raise RM5bil in Islamic bonds in 2009, the fund said the matter was prepared and approved by the Cabinet.

It also said the RM5bil Islamic bond issuance was fully underwritten by AmBank, which earned all the commission and not Goldman Sachs.

The other contentious issues raised by Dr Mahathir that 1MDB addressed were:

> The interest per annum on the RM42bil loan is RM2.4bil, and not RM3bil;

> The RM5bil Islamic debt paper was issued at a yield of 6.15%, not 7% as alleged, and that it was fair given the tenure of the paper stretching over 30 years;

> The RM2bil loan furnished by billionaire T. Ananda Krishan’s Tanjong group to 1MDB in February was in accordance with an agreement signed between both parties on Aug 7 last year;

> The Tun Razak Exchange (TRX) land was acquired for RM230mil, not RM320mil as alleged. 1MDB has to build the infrastructure for the TRX development that comes up to RM1,500 per sq ft;

> PetroSaudi International (PSI) injected oil fields in Turkmenistan and Argentina worth about US$2.7bil into a JV company which 1MDB paid US$1bil for a 40% stake. Dr Mahathir alleged that PSI did not “inject a single cent” into the JV company; and

> The 40% stake in PSI was later converted into an Islamic loan. 1MDB’s total exposure to PSI between September 2009 and June 2012 came up to US$1.83bil. The loans were converted to equity and eventually sold for US$2.318bil, an exercise that 1MDB claims earned it a return of US$488mil.

1MDB said the US$2.318bil was put in a Cayman Islands-registered fund and in return it received “fund units”.

“These fund units were owned by 1MDB via its 100% subsidiary, Brazen Sky, and held through BSI Bank Singapore as custodian,” it said in a statement yesterday.

The value of the investments held by Brazen Sky in BSI Bank came into question because the money is not in the form of cash but “units”.

In March, Prime Minister Datuk Seri Najib Tun Razak told Parliament that 1MDB’s investments had been redeemed and the “money” was placed with BSI Bank.

In May, the answer was amended to state that the investments had been redeemed and were in the form of “units”.

1MDB president and group executive director Arul Kanda Kanda­samy was also reported to have said on foreign media that he had seen the cash.

On this matter, 1MDB denied that Arul Kanda had said he had “seen the cash” and stated that there was a misunderstanding that led to the answer by Najib, who is also Finance Minister, in Parliament.