Abu Dhabi’s IPIC to pursue 1MDB arbitration in London court

Abu Dhabi sovereign-wealth fund International Petroleum Investment Co. (IPIC) plans on pursuing arbitration in a London court for about $6.5bn it says it was owed as a result of a dispute with Malaysian state investment fund 1Malaysia Development Bhd. (1MDB).

The arbitration was a fallout of an earlier dispute that erupted in April 2016 when 1MDB reneged on key provisions of a $1bn loan agreement with IPIC, wherein IPIC was responsible for interest payments on some of its debt.

Later, IPIC said that it would only make those payments as an official guarantor on two 1MDB bonds and that it intended to pursue repayment from Malaysia’s Ministry of Finance.

A key point that could impact the arbitration is the exact status of a British Virgin Island based company called Aabar Investments PJS Ltd., which received more than $3.5bn in transfers from 1MDB over several years. These transactions were made as part of agreements struck between 1MDB and Aabar.

IPIC, however, says it did not receive any funds from 1MDB and has said that Aabar, which has a similar name to an IPIC investment company in Abu Dhabi called Aabar Investments PJS, wasn’t part of its corporate structure.

According to sources, 1MDB has argued in private negotiations between the companies that IPIC did indeed own the Aabar company in the British Virgin Islands.

Further, during its business interactions with IPIC in the past, 1MDB was provided with a certificate of incumbency showing the Aabar company in the British Virgin Islands was owned by Aabar Investments PJS.

The certificate, dated 13 April 2012, also listed Khadem Al Qubaisi, former managing director of IPIC, and Mohamed Badawy Al Husseiny, former CEO of Aabar, as directors of the British Virgin Islands-based Aabar.

That the company might have been owned by Aabar is a legal distinction and important for the dispute. But investigators in two countries believe it was created to siphon funds from 1MDB for other purposes.

Source: WSJ


Malaysia’s 1MDB pays interest on debt after missing prior payments

Malaysia-based state investment company 1Malaysia Development Bhd. (1MDB) paid interest outstanding on its Islamic debt after missing two payments on other securities earlier.

1MDB made a scheduled payment of MYR 143.8m ($34.9m) on its MYR 5bn 5.75% notes due 2039. 

The company had previously missed the coupons for two sets of dollar-denominated bonds amid a dispute with Abu Dhabi’s International Petroleum Investment Co., which had guaranteed the debt.

That led to a default by 1MDB in April, adding to the financial scandals for the company that is already a target of global investigations into allegations of money laundering and embezzlement. 1MDB has consistently denied wrongdoing.

Source: Bloomberg

1MDB misses interest payment; says its in default

Malaysia-based 1Malaysia Development Bhd. (1MDB) stated that it had missed a $50m interest payment on its $1.75bn bond amid a dispute with Abu Dhabi’s sovereign wealth fund over which party was required to make the payment.

The Malaysian state fund withheld the interest payment because Abu Dhabi’s International Petroleum Investment Co. (IPIC), which is the co-guarantor of the 5.75% bonds maturing in 2022, hadn’t paid the obligation either. The missed payment triggered a cross-default on 1MDB’s MYR 7.4bn ($1.9 billion) of debt.

The two companies have been locked in a dispute over 1MDB’s debt obligations to IPIC under an agreement reached in May 2015. As part of the agreement, the IPIC had then stated that it would assume the obligation to pay interest due under $3.5bn of 1MDB bonds that it had guaranteed. IPIC said this month that 1MDB had defaulted on the agreement after the Malaysian fund failed to pay it more than $1bn in connection with a loan.

The default is the latest episode in financial scandals that have rocked 1MDB, already a target of global investigations into allegations of money laundering and embezzlement. It has consistently denied wrongdoing.

Source: Bloomberg

Saudi Arabia raises $10bn bank loans

Oil rich Saudi Arabia is raising a $10bn, five year loans, as it battles falling crude oil revenues and reserves. According to bankers close to the deal, the loan has a spread of 120bps over Libor.

The issuance was upsized from $6-8bn to $10bn on stronger investor demand.

The issuance provides the kingdom funds as it has burned about $150bn of foreign reserves since 2014 due to the worst slump in crude oil prices.

Leading lenders HSBC, Bank of Tokyo-Mitsubishi and JP Morgan, pledged about $1.3bn each. Minimum bids for the loan were at $500m to qualify as a participant.

This issuance, a first by the kingdom since 25 years, could prompt further issuances by other neighboring nations such as Abu Dhabi which has mandated banks ahead of its third international bond issuance.

Source: FT