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