Najib makes admission that can cost Malaysian Government dearly - A bondholder class action for all and any damages caused by the defaults and his statements could be looming.....


by Ganesh Sahathevan

In typical Malaysian fashion PM Najib has declared to the Malaysian Parliament that he and 1 MDB "chose" not to pay 1 MDB bondholders because of a dispute with IPIC ,who are co-guarantors of the bond.


Repayment of a debt may be disputed in the event that there is conflict between the lender and borrower, but in this case, Najib has in fact admitted that the debt is not in dispute.By his own admission, 1 MDB simply chose not to pay.That there is a dispute with anyone else, even the guarantor, is of no relevance to the creditor bondholders.


Consequently, the bondholders and their trustees are entitled to sue 1 MDB and the Malaysian Government for all and any damages (there have now been two instances) , in addition to recovery of any monies owed.


The defaults (there have already been two instances this far) and the continued public insistence by Najib , 1 MDB and the Malaysian Government have already caused a loss in capital,when the bonds fell in value. There has also been an increase in the cost of insuring the lending.
Bloomberg reported on 26 April 2016, after the first default:


Five-year credit-default swaps climbed three basis points to 165 basis points, the highest since March 9, according to data provider CMA.

The price of 1MDB’s 4.4 percent dollar bonds due in 2023 dropped 3 cents on the dollar to 87 cents, Bloomberg-compiled data show. The yield surged 65 basis points to 6.81 percent. The three-year sovereign note yield climbed five basis points to 3.32 percent, the steepest increase since Feb. 24.

What other impact these loses might have at the portfolio level of the funds that hold these bonds is not yet clear, but suffice to say that even a small fraction of the many billions in dollars that these funds are likely to hold is sufficient to put a major dent in Malaysia's finances.

Whoever formulated this statement , and Najib's subsequent statement to Parliament, may want to flee the country and remain in hiding for the rest of their lives:

"Whilst 1MDB has the funds to have made the interest payment, it is 1MDB’s position, as a matter of principle, that it was IPIC’s obligation to do so," the company said. "Until IPIC accepts that all obligations have been met, 1MDB is obliged to withhold payments and will seek legal recourse and resolution."
END




Najib explains 1MDB's decision not to pay IPIC

Published Today 10:33 am Updated Today 10:46 am 8
Prime Minister Najib Abdul Razak defended his brainchild 1MDB, claiming it has enough cash to pay US$50.3 million interest for the US$1.75 billion Langat bond.He said 1MDB did not pay the interest as it was in dispute with the Abu Dhabi sovereign wealth fund International Petroleum Investment Company (IPIC)."1MDB has a total fund of RM2.3 billion and able to repay the US$50.3 million interest.

"However, 1MDB did not do so because of (its) dispute with IPIC," he said in a parliamentary written reply under his capacity as the Finance Minister.

"For the information of the House, IPIC had made the interest payment under the provision of IPIC's guarantee," he noted.

Najib was responding to questions raised by Mohd Ariff Sabri Abdul Aziz (DAP-Raub), who asked about the total debts involving IPIC.

"What was the reason that 1MDB unable to repay US$50 million debt interest?" asked Ariff.


[More to follow]

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