US$3.5bil is the focale of 1MDB-IPIC dispute
PETALING JAYA: The dispute between 1Malaysia Development Bhd (1MDB) and International Petroleum Investment Company (IPIC) revolves around US$3.5bil (RM14.55bil), which cannot be accounted for by both sides.
1MDB claims that the money was paid to Aabar-British Virgin Island (Aabar-BVI). However, the Abu Dhabi-backed fund contends that Aabar-BVI is not part of its stable of companies.
The deal between 1MDB and IPIC can be traced to 2012 when the Malaysian fund issued two equally valued US dollar bonds totalling US$3.5bil to finance its acquisition of Tanjong Energy Holdings Sdn Bhd and Genting Bhd’s power assets.
Both the bonds were issued in a space of five months – May and October – the same year. The proceeds were raised outside Malaysia.
As 1MDB did not have the financial strength to issue international debt papers, IPIC co-guaranteed the bonds.
In return, IPIC has an option to buy up to 49% stake in the power plants.
Out of the US$3.5bil raised, US$1.367bil or 43.1% of the net proceeds were transferred out of 1MDB to Aabar-BVI and subsequently to a company aligned to an associate of Low Taek Jho – infamously known as Jho Low – according to the US Department of Justice. The money was transferred between 2012 and 2014.
The DOJ had said in its report that Aabar-BVI has no genuine affiliation with IPIC or its subsidiary, Aabar Investments PJS (Aabar).
Aabar-BVI was set up to make it look as if it was related to IPIC when it was not in actual fact.
Aabar-BVI was incorporated in the British Virgin Islands in March 2012 by Mohamed Ahmed Badawy Al-Husseiny (Aabar CEO). He is said to be working together with Khadem Abdulla Al-Qubaisi, who is the IPIC managing director.
IPIC dismissed both Mohamed Ahmed and Khadem in 2015. Both were detained by authorities in Abu Dhabi and it was reported that their assets are frozen.
In May 2015, 1MDB defaulted on a loan from Deutsche Bank and IPIC lent the Malaysian fund US$1.2bil (RM4.9bil) cash.
By then, the Finance Ministry had already taken control of 1MDB. Tan Sri Dr Mohd Irwan Serigar Abdullah was the secretary-general of the ministry.
In April 2016, 1MDB defaulted on two interest payments due under the two bonds of US$3.5bil. As IPIC was the co-guarantor, the Abu Dhabi fund had to pay interest amounting to US$103mil on behalf of 1MDB.
By then, news had filtered out that 1MDB and IPIC were in dispute over the legal status of Aabar-BVI that had received US$3.5bil between 2012 and 2014.
In 2017, the Finance Ministry-controlled 1MDB and IPIC then entered into settlement negotiations. As part of the settlement agreement, 1MDB agreed to IPIC’s US$1.2bil and assume all liabilities of the US$3.5bil bonds.
The question that has been raised is why the Finance Ministry/1MDB paid IPIC US$1.2bil and agreed to undertake the US$3.5bil liability when the legality of Aabar-BVI was still in dispute.
Source: TheStar