1MDB says some of its bonds are in default after missed interest payment
PUBLISHED ONApril 25, 2016 6:15 PM
State investors 1Malaysia Development Bhd (1MDB) said on Tuesday it has not made a US$50.3 million (S$67.67 million) interest payment on its bonds due 2022 following a stand-off with Abu Dhabi sovereign fund IPIC, but said it will meet all its other liabilities.
1MDB said the missed interest payment had caused a cross default on its 5 billion ringgit ($1.72 billion) sukuk due 2039 and the 2.4 billion ringgit sukuk due between 2021 and 2024.
The two state investors are locked in a dispute over the interest payment on a US$1.75 billion bond which was due earlier this month.
A partner of troubled Malaysian government investment fund 1Malaysia Development Bhd. said Monday it would pay US$50 million in overdue interest owed on a 1MDB bond, but only after the bond is declared in default.
The default could trigger further defaults on billions more in debt.
The partner, Abu Dhabi sovereign-wealth fund International Petroleum Investment Corp., is a guarantor of the US$1.75 billion bond privately issued by 1MDB in 2012, and will pay the interest under those obligations, IPIC said in a filing to the London Stock Exchange.
But IPIC said it would only do so if 1MDB itself defaulted on the payment. That could lead to cross defaults and demands for early repayment on at least 8.2 billion Malaysian ringgit in other 1MDB debt, as well as on a US$3 billion bond also privately issued by 1MDB in early 2013, according to a memo from 1MDB to Malaysian Prime Minister Najib Razak viewed by The Wall Street Journal.
Both sides are preparing to enter arbitration over the disagreement, according to a person familiar with the matter.
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