KUALA LUMPUR - Malaysia has reached agreement to pay Abu Dhabi about US$1.2 billion (S$1.7 billion) to settle debts incurred by its controversial state investment fund 1MDB, it was announced Monday.
Half will be paid to the emirate's sovereign wealth fund International Petroleum Investment Co by end-July and the rest by the end of the year, according to an IPIC statement to the London Stock Exchange.
1MDB (1Malaysia Development Berhad) will also assume responsibility for the coupon and principal obligation on bonds worth $3.5 billion which it issued and which were guaranteed by IPIC, the statement said.
"These obligations will be met by 1MDB, primarily via monetisation of 1MDB-owned investment fund units," the Malaysian fund said in a separate statement quoted by Bloomberg News.
"This arbitration settlement and monetisation of investment fund units represents the resolution of a significant challenge, and is a major part of the 1MDB rationalisation plan, which is now at its final stages of conclusion." 1MDB and the Abu Dhabi fund had been involved in a dispute that extended to repayments on two sets of bonds issued by the Malaysian fund.
In April 2016 1MDB defaulted on US$1.75 billion in bonds after missing an interest payment of US$50 million.
In June that year Abu Dhabi announced it was seeking US$6.5 billion from the Malaysian fund through international arbitration.
1MDB and its founder Malaysian Prime Minister Najib Razak are battling allegations that billions were looted from the fund in complex overseas deals that are being investigated by authorities in several countries.
In April 2016 a Malaysian parliamentary committee said at least $4.2 billion in questionable overseas money transfers were made by 1MDB.
Both the fund and Najib have vehemently denied wrongdoing.