Malaysian Government prepares to consolidate 1 MDB bonds,repay bondholders.Bondholders may suffer haircut,and Malaysian taxpayers a very hefty bill for professional services



by Ganesh Sahathevan


Malaysiakini has reported:


1MDB's engagement with its US dollar-denominated bondholders is a good move towards restoring confidence in the market, says Deputy Finance Minister Johari Abdul Ghani.

He said bondholders must be told about the dispute between 1MDB and the Abu Dhabi-based International Petroleum Investment Company (IPIC) which had led to the default of the notes.

“They must communicate this with bondholders. If they don't understand (the issues), then they will panic unnecessarily," Johari told reporters after launching a workshop on 'Developing an Islamic Infrastructure Investment Platform' in Kuala Lumpur today.

Yesterday, 1MDB announced that it had hired Alvarez & Marsal Asia Ltd as its financial adviser as it began an engagement process with bondholders following the default on the US$1.75 billion 1MDB Energy (Langat) Ltd (Langat Notes) fixed rate 5.75 percent notes due 2022.


Johari's statement appears disingenuous for Alvarez and Marsal are in the debt workout and restructuring business.FOr example the firm managed the Lehman Brothers liquidation, for which it was paid a reported USD 500 million. Other notable assigments include the liquiation of Arthur Andersen.


The firm's well referenced Wikipedia entry includes this ominous snippet:

Competitors have suggested that Alvarez & Marsal has boosted its own business while restructuring failing companies, pointing to a deal with Enron Corp.'s accounting firm, Arthur Andersen as an example. While dismantling Andersen, they note Alvarez & Marsal hired six turnaround specialists from the firm.[9] At Lehman Brothers, Alvarez and Weil Gotshal were noted to have received nearly $1Bn[10] in fees over the three years following the banks collapse[7] making the Lehman bankruptcy the most expensive in history as at 2013.[11].

DF King on the other hand provide share registry and investor relations services. The hiring of both firms together suggests that the Malaysian Government intends to consolidate bondholders to enable an efficient distribution of liquidated assets. Whether bondholders are fully redeemed is left to be seen, but it is certain that the Malaysian taxpayer will suffer a very hefty bill for professional services,and may well have to indemnify bondholders for any losses.
END 

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