KUALA LUMPUR: Malaysia Development Bhd (1MDB) today said International Petroleum Investment Company (IPIC) has not made an interest payment of US$50.3 million as required under the terms of a binding term sheet executed on May 28, 2015.
Under the binding term sheet, 1MDB said IPIC assumed the obligation to pay the interest and the principal for its US$1.75 billion bond due 2022, issued by 1MDB Energy (Langat) Ltd.
“Due to a dispute between the parties, neither 1MDB, nor its subsidiary, 1MDB Energy (Langat) Ltd, have made payment and are now in default as per the terms of the bond,” the strategic development company said in a statement here today.
However, 1MDB has reiterated that it will meet all of its other existing financial obligations, and had ample liquidity to do so.
Meanwhile, 1MDB said it had attempted to meet all its obligations to IPIC, whereas the latter, had publicly denied receipt or knowledge of various financial transactions or guarantees entered into between the parties.
“Accordingly, 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.
“Until IPIC accepts that all obligations have been met, 1MDB is obliged to withhold payments and will seek legal recourse and resolution,” it added.
1MDB said it is committed to working openly with IPIC to resolve the dispute to minimise the impact on all stakeholders and avoid the need for accelerating bond or Sukuk payments.
1MDB also confirmed that cross defaults have been triggered on the 1MDB RM5 billion Sukuk due 2039 and the RM2.4 billion Bandar Malaysia Sdn Bhd Sukuk due between 2021 and 2024 as a result of the default on the bond.
“There is no 1MDB cross default on an RM800 million loan from the Social Security Organisation.
“However, there is a possibility that the ‘material adverse effect’ clause may be triggered due to the developments highlighted above,” it said.
The RM5 billion Sukuk and the SOCSO loan both benefit from guarantees issued by the government. It has also confirmed that there is no cross default on its other remaining debt. –Bernama