Update 1MDB says defaulted on US$50m interest for US$1.75b Langat bonds

by **Cals** Wed 27 Apr 2016, 06:38

Update

[size=28]1MDB says defaulted on US$50m interest for US$1.75b Langat bonds

By Chong Jin Hun / theedgemarkets.com | April 26, 2016 : 7:46 PM MYT

KUALA LUMPUR (April 26): 1Malaysia Development Bhd (1MDB) said it had defaulted on the US$50.3 million (about RM198 million) interest payment for the US$1.75 billion bonds issued by its unit 1MDB Energy (Langat) Ltd.

In a statement today, 1MDB, however, insisted that the risk of cross default on other bonds issued by company was limited. The Malaysian Government via Minister of Finance Inc owns 100% of 1MDB.

According to 1MDB, neither the company nor guarantor International Petroleum Investment Co (IPIC) had paid the US$50.3 million interest to 1MDB Energy (Langat) bond holders.

"Accordingly, due to a dispute between the parties, neither 1MDB nor its subsidiary, 1MDB Energy (Langat), have made payment either, and are now in default per the terms of the Langat notes.

"Notwithstanding the dispute with IPIC, 1MDB reiterates that it will meet all of its other existing financial obligations and has ample liquidity to do so. 1MDB withheld the interest payment following claims by IPIC that certain payments and other obligations were still owed it," 1MDB said.

1MDB's statement today was in response to IPIC's statement to the London Stock Exchange yesterday.

IPIC said it would pay the US$50.31 million interest to 1MDB Energy (Langat) bond holders "but only after 1MDB defaults on its payment obligations in respect of such notes".

IPIC said a 1MDB default did not mean a cross default in IPIC, which also indicated that it would pay the interest based on its obligation under the guarantee for the 1MDB bonds.

Today, 1MDB said while it had the funds to pay the interest, it was 1MDB's position, as a matter of principle, that it was IPIC's obligation to do so.

1MDB said until IPIC accepted that all obligations had been met, 1MDB was obliged to withhold payments and would seek legal recourse and resolution on the matter.

"1MDB has been surprised by IPIC's comments and unequivocally asserts that it has attempted to meet all its obligations to IPIC, whereas IPIC has publicly denied receipt or knowledge of various financial transactions and/or guarantees entered into between the parties," 1MDB said.

1MDB says limited cross defaults

Today, 1MDB confirmed that cross defaults had been triggered on 1MDB's RM5 billion sukuk due 2039 (1MDB Sukuk) and the RM2.4 billion Bandar Malaysia Sdn Bhd sukuk due between 2021 and 2024 as a result of its default on the 1MDB Energy (Langat) bonds.

But there is no cross default on the RM800 million loan from the Social Security Organisation (SOCSO Loan), according to 1MDB.

"However, there is a possibility that the 'material adverse effect' clause may be triggered due to the developments highlighted above. The 1MDB Sukuk and the SOCSO Loan both benefit from guarantees issued by the Government of Malaysia.

"1MDB confirms that there is no cross default on its other remaining debt, i.e. the US$1.75 billion fixed rate 5.99% 1MDB Energy Ltd notes and the US$3 billion fixed rate 4.4% 1MDB Global Investments Ltd notes. 1MDB has no other debt," 1MDB said.

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