Socio-economy / Umno & Barisan Nasional

IPIC – The RM3.6 billion payment for 1MDB dummies

This morning there was a pandemonium on how 1MDB managed to repay its USD975 million (RM3.6 billion) loan to its bankers. Lucky bankers.

And of course, the loudest noise will come from politicians who are overjoyed to see that 1MDB could repay its loans. These people will ignore the obvious fact that 1MDB actually managed to repay those bankers just because it received a ‘not a loan, not a bail out’ payment from International Petroleum Investment Company (IPIC) last week.

1MDB, the financial merry go round

Arul Kanda still have not retracted and apologise for the lie he told in February

For the uninitiated, here is the simplified description on what this USD975 million loan payment is all about.

Sometime in September 2014, 1MDB acquired a USD975 million loan from a consortium of banks which was then guaranteed by Malaysian government and secured using the USD1.103 billion worth of units it has in the BSI Bank in Singapore.

This USD975 million loan was then used to pay Aabar Investments (subsidiary of IPIC) for an early termination of a 10-year old financial options.

It is unclear from where this USD1.103 billion worth of units came from. These units are said to be held custody by a special purpose vehicle called Brazen Sky, registered in the Cayman Islands.

Now, back in February 2015 the CEO of 1MDB mentioned that this USD1.103 billion in BSI Bank is in the form of cash. This is an expected response, generally to appease its lenders.

The Prime Minister confirmed it was indeed cash during his parliamentary reply on March 10th 2015.

But in late April, news report from Singapore’s Business Times stated that there is some discrepancy in 1MDB’s bank account in BSI Bank.

This raised an alarm among the consortium of banks in early May and they planned to ask 1MDB to settle their loan ahead of the repayment deadline in September 2015. The banks have the right to do this if they suspect its client has no capability to repay the loan.

Unfortunately their suspicion and the discrepancy is confirmed to be true when on the 19th May 2015 the Prime Minister announced that the money parked in Singapore is not in cash, but in paper assets; of which a few days later the Ministry of Finance eventually amended it to be in units.

There was no cash after all. The banks will not accept worthless documents called ‘units’ as collateral for their loan.

Panic strikes and on 29th May 2015, the Ministry of Finance announced a ‘rationalisation exercise’ where IPIC/Aabar will give payment of USD1 billion (RM3.6 billion) to 1MDB to help it repay the banks by 4th June 2015.

Basically, money from the banks given to Aabar in September 2014, is returned to the bank in June 2015. This business model is often called – ‘the unnecessary stupidity’.

On top of it all, the ‘units’ are supposed to be ‘profits’ from an investment made by 1MDB which was terminated in 2012. But the profits was redeemed not in the form of cash, but substituted with assets/units mutually agreed to be worth USD1.103 billion.

If indeed there is real value in those units, 1MDB should just cash them out in August to meet its deadline in September, or if 1MDB is really strapped for cash, all it has to do is just wait till after the September deadline and the consortium of banks will just take ownership of those units.

But this is not to be.

What is more absurd, to sweeten the deal of getting their own money back from IPIC/Aabar, the Finance Ministry also announced that the RM3.6 billion payment will be part of a larger strategy to lessen a RM16 billion 1MDB debt; in other words, IPIC/Aabar will get financial assets of 1MDB.

It is uncertain what these assets are although the only known valuable assets 1MDB has are the lands in TRX and Bandar Malaysia which were originally reserved for bumiputra development.

So in the end, the bankers get their money back, with some interests; Aabar gets USD975 million cash last September and from now on, some of 1MDB’s assets, including those redundant units. And 1MDB gets to lose some of our prized assets.

Since 1MDB is getting compliments for this whole financial absurdity, maybe we should congratulate all involved with a pat on the back.

Well done, 1MDB.

Your zero governance strategy will be made an example among financial journals and research papers in years to come.

So there you go, the simplified summary of what had happened. Should there be any other versions, please do not hesitate to state your own simplified description on what really happened.

Thank you.

News source:

http://www.themalaysianinsider.com/malaysia/article/us975-million-loan-repaid-says-1mdb

http://www.bernama.com/bernama/v8/sp/newssports.php?id=1139753

http://www.themalaysianinsider.com/malaysia/article/did-1mdb-pay-aabar-us1-billion-to-terminate-options

http://www.thestar.com.my/Business/Business-News/2015/05/29/Ahmad-Husni-IPIC-to-provide-US$1b-to-1MDB/?style=biz

http://www.themalaysianinsider.com/malaysia/article/jittery-lenders-might-force-1mdb-to-settle-debt-earlier-says-report

http://www.bernama.com/bernama/v8/bu/newsbusiness.php?id=1139472

19 thoughts on “IPIC – The RM3.6 billion payment for 1MDB dummies

  1. Pingback: IPIC – The RM3.6 billion payment for 1MDB dummies | ajai62

    • Reezal Merican – Indian ARB
      Arul Kekanda – Indian 1MDB
      Ananda Krishnan – Indian beneficiary 8 billion
      Azeeez Rahim – Indian Tabung Haji
      Irwan srigar – Indian MOF
      The History of 1MDB started when Abdullah Badawi was ousted and Najib Razak
      grab his position. The UMNO Presidency is a coveted post where money falls from trees..
      Chinese companies tripped over themselves to appoint UMNO Presidents sons, brothers, fathers, daughters, father in laws. son in laws etc..as their company directors.
      And so it was Najib team of hangers on, brothers and companies quickly put into
      motion.
      To get cash you must borrow. And to make billons you must borrow big from the source of money…banks..local and international.

      Najib tried using the Trengganu angle with the chinese boy Jho Low pretending to
      be connected to the King of Saudi Arabia. If you want to lie, lie big according to this chinese boy published philosophy and bluster with grand themes to confuse the
      unsuspecting UMNO members or the Malays.
      Why the King of the centre of Islam would be the good aquaintance of a chinese boy from Malaysia should be the first warning bell.
      1MDB was done quietly until even Muhyidin or the cabinet dont know what they are up to?
      Was there a cabinet paper to nationalise all the IPP belonging to Powertek , Jimah and others?
      Did the cabinet knows that it was going to cost the country 25 billion to get the loans to pay off Ananda Krishnan and gang. Btw Ananda is accused of bribery in India and unwanted in indonesia.
      Only UMNO Presidents love him. There was rumours a Yacht in Perth belongs to the last UMNO President who shall be nameless.

      First the KSN was Indian, Ali hamsa who promptly appointed fellow Indian Irwan Srigar into MOF, appointed other friendly indians into CEO and Charimanship of Malay trust funds and banks.

      Thus the billion ringgit robbery by Ananda Krishnan is well plan. His IPP Powertek is not worth 13 billion for the cash that UMNO govt has to cough up.
      The income from the power station cannot pay off even the interest.

      But how do you get international banks to give billion ringgit loans to 1MDB which is only capitalised with 1 million ringgit?
      Why sell the Malaysian Govenrment name of course and this is abetted by Goldman Sach, Tim Leiners who are personal friends of Najib and
      Rosmah.

      Picture of Rosmah and his celebrity wife was on Sarawak Post.

      So that is the real story behind the billions stolen by Ananda Krishnan through 1MDB. That is why Jho Low complained why is the focus on him
      with his miserly 3 billion when they paid others billions? This must refers to the other 39 billions..given out by 1MDB directors and CEO.
      The others robbery immediately done by Najib and cronies are the RM2 Synergy merger.
      The 2RM SapuraKencana 5 billion merger.
      FGV billion listing
      MAS AirAsia lmerger
      These St Johns boys are just flipping oil and gas and plantation belonging to the Malays for the commission.

      Like

  2. Let’s hope Malaysia Inc. is not sold to foreigners through 1MDB. Najib is his desperation to hang on to his premiership may be ADVISED to do just that.

    May Allah protect Tun Dr Mahathir in his gallant mission to save Malaysia from being “pawned”.

    Like

  3. “This USD975 million loan was then used to pay Aabar Investments (subsidiary of IPIC) for an early termination of a 10-year old financial options.”

    The above goes beyond any common business sense or logic. Aabar did not part a single sen for that option, as I recall. Aabar did not pay to have the right accorded by that option. It is a derivative, created out of thin air on a piece of paper – poof!- Aabar now have right to subscribe to Edra shares on IPO. Why on earth do you have to pay Aabar for something Aabar did not pay n the first place?

    This is the second time an unnecessary perimum is paid, the first time IPP, where the government could have just waited for the license to lapse. In this case, 1MDB could have waited for the option to lapse; if there is no IPO then too bad that the option becomes worthless – Aabar never paid a single sen for it in the first place anyway.

    This is just wrong.

    Like

    • This is the beauty of the “Kafir’s” invented financial system.

      I assumed that the money invested to Aabar was kind of like “fixed deposit” investment? Agreed on XX amount of years. Should you decide to withdraw them earlier than the maturity period, you will be imposed with penalty (I think normally 1% – in some bank they are none!….)

      Yes, I agree with you…it is ridiculous…Aabar didnt part with a single cent but now they will get some good chunk of Edra or TRX?

      Who is the fool in the first place? Najib and the 1MDB directors!

      Who is the victim in all this? The Rakyat of course!

      Who make the profit in all these shams?

      As far as I can be certain…only Jho Low, Aaabar, Goldman Sach and the like!!!!!!

      Like

  4. Reblogged this on mymusings and commented:
    “This USD975 million loan was then used to pay Aabar Investments (subsidiary of IPIC) for an early termination of a 10-year old financial options.”

    The above goes beyond any common business sense or logic. Aabar did not part a single sen for that option, as I recall. Aabar did not pay to have the right accorded by that option. It is a derivative, created out of thin air on a piece of paper – poof!- Aabar now have right to subscribe to Edra shares on IPO. Why on earth do you have to pay Aabar for something Aabar did not pay n the first place?

    This is the second time an unnecessary perimum is paid, the first time IPP, where the government could have just waited for the license to lapse. In this case, 1MDB could have waited for the option to lapse; if there is no IPO then too bad that the option becomes worthless – Aabar never paid a single sen for it in the first place anyway.

    This is just wrong.

    Like

  5. JMD,

    Writer in KL CHRONICLES wrote an article on debt repayment yesterday. He even challenged pro mahathir’s bloggers WHAT NOW, APALAGI NAK DI SPIN?.

    One thing about this writer paid or otherwise is his low intellectual capability. Between you and him just like langit dan bumi. He has no class..only spin after spin after spin……no grey matter to understand the issue.

    Sedih…….you can also see qualities of other bloggers like mykmu, semut hitam, ybs like salleh keruak, rahman dahlan…….kononnya umno leaders……..as a sabahan i know there are fit fot sale at THE REJECT SHOPB

    Like

  6. Yes, Ah Jib Gor is drowning and clutching at straws to keep himself afloat – what about the Malaysian ship? Will al-Jemuan rush to sign the Trans Pacific Partnership Agreement and hand over this country to every sovereign wealthy capitalist?

    Like

  7. Bullshit Baffles Brains….And there is no end to Bullshit from 1MDB and its Board of Directors who should proudly claim to be Bullshit Artists!!

    Like

  8. well done JMD. I still not satisfied with the explanations. Why 1MDB nak menabik dada , you still owing 39B beb.. Please do highlight on 950M standy credit. When 1MDB going to pay? They cut allocation for Kementerian Kesihatan but gave away government fund to 1MDB. Where is Najib’s slogan “RAKYAT DIDAHULUKAN”

    Like

  9. .

    .

    The modus operandi of 1mdb seems similar to Madoff’s

    brazen ponzi scheme. Jho Low and his ilk are playing

    musical chairs of taking big loans [‘korek lobang’]

    , spending the money surreptiously and then much later

    when interest payment is due, take another loan/financial

    dealing-wheeling to pay interest on the loan [‘tutup lobang’]
    .

    . Eventually after the game will tire out by itself when immobility

    or ‘no-where-to-run’ situation appears. Then Najib-Rosmah will end up

    in jail for hundreds of years like Madoff. Let us all pray that the

    ‘no-where-to-run’ scenario appears soon enough. This game of making the

    nation poorer is tiresome and burdening all of us. Give this pray an

    Ameen. All the goodies for Najib-Rozie must come to an end!

    .

    .

    .

    Like

    • My fear, sir is the investigation agencies will drag their feet when some incriminating evidences surfaced. I am very pessimistc.

      Like

  10. 1. Ni soalan matematik:

    2. Pinjam 100 bayar 100, kemudian pinjam balik 100 bayar balik 100. Results in basically 0, right?

    3. Wrong.

    4. Hang ingat 100 tu mai mana? Langit?

    5. Pinjam 100 bayar 100, kemudian pinjam bali 100 bayar balik 100 = ?

    6. 100.

    7. In this case: US$1 billion. RM3.7 billion, in today’s money.

    8. That’s the price our country are paying. This time.

    9. That’s not the bad news. This is:

    10. We just “got” RM3.7b from Aabar. It’s not a loan. It’s not a bail out. It’s a business transaction.

    11. So what did we just sell Aabar for $1 billion?

    12. That’s not the end of the bad news. This is:

    13. We just settled about RM4 billion of IMDB’s debt for them.

    14. There are still RM44 billion to go.

    15. Think about THAT before you fucking go whoopie dah setel so apa lagi Tun mau!

    Like

  11. Pingback: Benarkah Unit di BSI Yang DiJadikan Cagaran Pinjaman USD975 Juta ? | Berita Malaysia

  12. Good analysis, well done.

    However on your point “On top of it all, the ‘units’ are supposed to be ‘profits’ from an investment made by 1MDB which was terminated in 2012. But the profits was redeemed not in the form of cash, but substituted with assets/units mutually agreed to be worth USD1.103 billion.”

    The US$1.1bn “units” comprise part of both original capital invested AND profits from the Petrosaudi joint-venture subsequently “bought out” by unknown 3rd party and reinvested in Caymans based funds. In other words the BSI units form half of the notorious US$2.2bn Cayman funds which critics allege don’t exist. The first half has already been spent (as disclosed in the accounts) on “working capital & debt interest” konon.

    No prizes for guessing whether the Cayman funds ie “units” actually exist or not………….

    Like

  13. 1MDB is not a simple case of ‘gali lubang, tutup lubang’. That alone is stupid enough. No. It appears that 1MDB is kes ‘gali lubang, tutup lubang, tapi lubang makin besar, dan — worse! — ada lubang baru pulak muncul.

    As if that’s not bad enough:

    Nak kambus lubang yang orang lain buat untuk tujuan entah apa-apa, dia korek lubang kat tanah kita! And if THAT is not bad enough, tanah kita yang dikorek tu makin kecik sebab sebhagian dah jual kat orang luar! You see how f**king messed up this piece of shit is?

    Like

  14. Bro JMD,

    Another funny story: http://www.themalaysianinsider.com/malaysia/article/arul-kanda-owns-up-to-ministry-slip-up-on-1mdb-funds

    This must be the most amazing slip I have ever heard of….Arul didnt just miscommunicate about the cash-statetement-unit, he also extended the miscommunication through to the reason altogether! from Bank Negara cumbersome regulation (Najib) to Husni’s Aaabar – 1MDB agreement to appoint BSI as custodian!

    WOW!

    Like

Astound us with your intelligence!

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s