KUALA LUMPUR, April 26 ― 1Malaysia Development Berhad (1MDB) confirmed today that cross defaults have been triggered after neither it, nor Abu Dhabi’s International Petroleum Investment Co (IPIC), made a US$50 million (RM196.3 million) interest payment on the local state investment company’s bonds.
1MDB said, however, that the cross defaults were “limited”, noting that they have been triggered on the RM5 billion 1MDB sukuk due 2039 and RM2.4 billion Bandar Malaysia sukuk due between 2021 and 2024.
The state investment firm said there was no 1MDB cross default on an RM800 million loan from the Social Security Organisation (Socso), nor a cross default on its other remaining debt ― the US$1.75 billion fixed rate of 5.99 per cent on 1MDB Energy Limited notes and the US$3 billion fixed rate at 4.4 per cent on 1MDB Global Investments Limited Notes.
“1MDB trusts that the respective parties and the financial markets in general, will understand this unfortunate default as being very specific to its dispute with IPIC and is not due to an inability to make payment when due,” 1MDB said in a statement.
“1MDB has and will continue to undertake discussions with all bond and Sukuk holders to explain the background of the dispute; clarify why it has taken the position to not make the interest payment on the Langat Notes; and reiterate that it has a successful rationalisation plan in place that enables it to meet all its existing debt obligations.
“1MDB wishes to underline that it is committed to working openly with IPIC to resolve the dispute in order to minimise the impact on all stakeholders and to avoid the need for accelerating bond or Sukuk payments in a way that would pose significant risks to its rationalisation plan,” the state investment firm added.
Financial newswire Bloomberg reported yesterday Abu Dhabi sovereign wealth fund IPIC as saying that it would pay 1MDB bondholders should 1MDB default on the US$50 million interest payment. The grace period for the payment expired yesterday.
1MDB and IPIC, who is co-guarantor for US$1.75 billion of 1MDB bonds maturing in 2022, have been disputing over who should pay the interest due under US$3.5 billion of 1MDB bonds that the latter had guaranteed.
According to Bloomberg, under an agreement between 1MDB and IPIC reached in May last year, IPIC had said it would assume obligations to pay the interest. But IPIC said earlier this month that 1MDB was in default of the agreement after the latter failed to pay it more than US$1 billion in connection with a loan.