1 MDB's latest IPIC deal-The numbers look like they add up


While 1 MDB has been the subject of much criticism, this latest deal with IPIC does seem like one where the numbers add up.
The deal as reported , this far, involves 2 limbs:
a) A contribution of USD 1 billion from IPIC which 1 MDB is meant to use to settle a USD 975 million loan from a syndicate of Middle East banks led by Deutsche Bank

b) A further contribution of some USD 4 billion, in exchange for undefined "financial assets".


These numbers appear to match  those in the the following prior  transactions between 1 MDB and IPIC  as described by the DAP's Tony Pua:
“When 1MDB needed to raise funds in 2012 to acquire the independent power producers (IPPs), Tanjong Power and Genting Sanyen, 1MDB had to ask IPIC to provide a guarantee in order to raise the funds via two bond issues, each worth US$1.75 billion. The guarantee was necessary despite the fact that 1MDB priced the bonds very attractively at 5.99% coupon rate,” said Pua.
Pua said the guarantee was no “friendly gesture” on the part of IPIC, but instead came at an exorbitant price to 1MDB, which “contributed in no small way to the massive annual interest bill and cashflow crunch for 1MDB”. 
“Firstly, 1MDB had to dock approximately 40% of the loan with IPIC as security deposit. This amounted to RM4.47 billion (US$1.4 billion) as disclosed in the March 2014 financial statements. Effectively, this means that 1MDB is pay 5.99% interest on a US$3.5 billion loan despite having access to only 60% of the funds or US$2.1 billion.
Then , there is the  issue of the option issued Aabar, a IPIC subsidiary: 
“Secondly, 1MDB had to offer the option for Aabar to acquire up to 49% equity interest in Powertek Investment Holdings (PIH) and 1MDB Energy (Langat), which are the holding companies for the acquired IPPs in order to secure the guarantee,” said Pua.
Based on its full year March 31, 2014 financial statements, 1MDB disclosed that its subsidiary 1MDB Energy Holdings Ltd had taken a bridging loan facility of US$250 million in May 2014 to buy back these options granted to   Aabar, called ‘the Aabar options’.
“This represents a compensation to Aabar although the final settlement consideration isn’t yet known. In fact, it has been speculated that the options compensation might be as high as an incredulous US$1 billion, based on analysis by The Edge weekly,” Pua noted.
Given these prior transactions , this latest deal looks like it involves:
a) IPIC/Aabar releasing USD 1 billion of the  security deposit paid IPIC as part of the loan guarantee agreement
b) A novation of 1 MDB for IPIC, such that IPIC takes over 1 MDB's obligations pursuant to the two USD 1.75 billion 10 year note issues .This would be required given that the collateral underlying the guarantee has been weakened.Put in another way, note holders are not going to feel too comfortable knowing that the guarantor is short more than 70% of the collateral it had required to provide the guarantee in the first place.

Added together, IPIC's contribution totals USD 4.5 billion, at present time.Add to that total interest of about USD 1-1.5 billion payableover the next 7 years ,and the figure gets to USD 5.5 to USD 6 billion, less the USD 400 million left over from the deposit for the guarantee that would no longer be needed. Then, the total contribution would be in the USD 5-5.5 billion range,which is in the USD 5 billion ballpark of the original deals.

IPIC is not likely to be doing any of this for nothing, so the question  remains as to what IPIC gets in return.Recall that it has to pay interest of about USD 1-1.5 billion,  and in about 7 years, principal of USD 3.5 billion. 
It is not inconceivable that what IPIC gets is a share, if not all , of Edra Energy. Of course, Edra's assets might well be worthless, given that the bulk of the IPP contracts which underlie Edra's cashflow are mostly about to expire.
However, there is talk of injecting Edra into Tenaga Nasional Bhd,so it is not inconceivable that what IPIC gets for its trouble is a large chunk of TNB.
As I said,the numbers look like they add up.I did not however say that Malaysian taxpayers would like it.

END

Table of known 1 MDB debt: 



Comments

Post a Comment

Popular posts from this blog

Ben Robert-Smith : How was Justice Anthony Besanko of the Federal Court able to find that the crime of murder has a civil twin, which can be determined on a balance of probabilities

Image
 by Ganesh Sahathevam                                                                                                                  The Hon Justice Anthony Besanko Media reports about the Ben Robert-Smith defamation matter  have at least given the impression, if not asserted,  that Justice Anthony Besanko of the Federal Court found  that Robert-Smith had committed murder. Most if not all reports have been at pains to stress that the finding was based on a balance of probabilities, and not beyond a reasonable doubt, for the matter was a civil and not criminal matter.  However,  reading his summary one can immediately see that Justice Besanko  found not that Roberts-Smith had committed murder but that the " respondents had, (on  a balance of probabilities) established the substantial truth"  that  Roberts-Smith had committed murder.  However, murder is a  crime and a finding of murder in a criminal court (which is the court in which crimes like murder can be determined!) inv
Read more

Who authorised former NSW Police Commissioner Mick Fuller to say anything about the Berejiklian era quarantine fee and why? Fuller's notice confirms suspicion that NSW Berejiklian government had no basis to impose the quarantine fee, nor quarantine persons who were COVID negative 

Image
 by Ganesh Sahathevan      Premier Gladys Berejiklian with NSW Police Commissioner Mick Fuller and Brigadier Mick             Garraway Who authorised former  NSW Police Commissioner Mick Fuller  to say anything about the  Berejiklian era  quarantine fee and why? Fuller's issuance of his  COVID  quarantine notice, and subsequent silence, would seem to confirm suspicions raised on this blog that NSW's Berejiklian government had no basis to impose its quarantine fee. Fuller's conduct also adds to suspicion that the Berejiklian government did not have the authority, even under its COVID emergency powers, to quarantine persons who were COVID negative. International arrivals had to test negative for COVID before boarding their flights to Sydney, and tests had to be administered within 72 hours of departure. Quarantine on arrival of those who exhibited no COVID symptoms was quite likely unnecessary. It did, of course help bolster Gladys Berejiklian's approval ratings. TO BE RE
Read more

Revenue NSW COVID Quarantine Fee payment demand notices suggest that Police Commissioner Mick Fuller breached the law with his demand for quarantine fees

Image
 By Ganesh Sahathevan  Anyone who has received a Revenue NSW Quarantine Fee demand for payment notice  will be familiar with these words that are contained in the notice: What is the quarantine service fee? A mandatory quarantine service fee applies to all travellers arriving in New South Wales (NSW) who are required to quarantine as part of the public health order. Mandatory quarantine is needed to stop the spread. of COVID-19 in NSW The qurantine fee has been charged pursuant to Section 70 of  the NSW Health Act. However, as previously reported, that section does not permit any imposition of mandatory fees.  However, in apparent defiance of Section 70 of the Health Act, Fuller issued a notice   in which he said  that Revenue NSW " will be charging a mandatory quarantine fee". TOE BE READ WITH  Former NSW Police Commissioner Mick Fuller said in his notice that Revenue NSW " will be charging a mandatory quarantine fee" - Former NSW Ministers Hazzard, Tudehope insis
Read more