KUALA LUMPUR - The Public Accounts Committee (PAC) has revealed that the 1Malaysia Development Berhad (1MDB)'s debt stood at RM50bil (S$17.3bil) as of January this year.
In a 106-page 1MDB report tabled in Dewan Rakyat on Thursday, it said the debts were incurred due to among others, its over reliance on the refinancing exercise to pay off their matured debts by taking in new loans to pay off the interests of their previous loans.
"After thorough investigation, PAC has found their financing structure and their financial performance to be unsatisfactory," the report said.
At first, said the report, the debt stood at RM5bil in 2009 and it went up to RM42bil, compared to their assets valued at RM51bil in the financial year ending March 31, 2014 and it had spent RM2.4bil to pay off the loan interests.
"In January 2016, their debt stood that RM50bil, compared to their assets valued at RM53bil, where 1MDB has spent RM3.3bil to pay off the loan interests between April 1, 2013 to March 31 2015," said the report.
The report said 1MDB had paid RM3.3 bil for interests on the loans they took from April 1 2014 to March 31, 2015, which the 1MDB said its financial audit is yet to be audited.
"It is clear that the debt level and repayment of interest is too high compared to the cash flow of the company," said the committee.
It also said that 1MDB relied on the refinancing exercise to pay off their matured debts and also took in new loans, which among others, used to pay off the interests of previous loans.
After being in operations for five years, PAC said, 1MDB faced an imbalance cash flow in Nov 2014.
"The management and the board of directors relied on the Initial Public Offerings (IPO) of Edra Energy Berhad to generate funds, which would be used to pay off the debts and interests.
"However the IPO could not be carried out due to internal and external factors," said PAC.
The PAC also said1MDB faced its first loss at RM665mil, which was announced in Nov 2014, which had resulted in a loss of confidence in the company.
1MDB subsequently could not pay off its almost maturing debts which stood at RM2bil, through its refinancing exercise.
"The company's business model is overly dependent on loans and this caused a burden on the company as it did not have enough income to sustain operational costs and pay off its loans," read the report.
PAC found that the Government took immediate steps to fix the company's cash flow problems which surfaced in 2014.
In January 2015, a new higher management was brought in to 1MDB, after which the Minister of Finance Incorporated (Menteri Kewangan Diperbadankan) zoomed in on it seriously.
"After that, research was done and strategic measures were identified and implemented in February 2015," it said.