Malaysia CDS Spike After Abu Dhabi Puts Scandal-Ridden 1MDB In Default
By Tyler Durden
Over the better part of the past year, we’ve documented the curious case of 1MDB, Malaysia’s government investment fund founded in 2009.
It’s a long and exceptionally convoluted story that doesn’t exactly lend itself to a concise summary but suffice to say that the development bank was something of a black box right from the beginning and in 2013, some $680 million allegedly tied to 1MDB ended up in Malaysian PM Najib Razak’s personal bank account just prior to an election.
There are any number of twists and turns in the 1MDB story including two bond offerings facilitated by a Goldman banker with ties to Najib and his wife, some shenanigans with a subsidiary of an Abu Dhabi sovereign wealth fund, a questionable Cayman Islands account or two, a dispute with KPMG, and an Australian firm that specialized in Malaysian penny stocks, but at the end of the day, Malaysians just want to know what exactly will come of an investigation into how Najib ended up with nearly three quarters of a billion dollars.
A quick reminder on the Abu Dhabi connection. Back in September, as the WSJ reported, the corruption scandal around 1MDB spilled beyond the country’s borders, as officials at a United Arab Emirates state investment vehicle rose questions about more than a billion dollars in money that they said is missing.
Abu Dhabi had long been a source of support for the fund, 1Malaysia Development Bhd., which was set up six years ago by Malaysian Prime Minister Najib Razak to develop new industries in the Southeast Asian country. Then, in September, as 1MDB tries to fend off a cash crunch, its backers in Abu Dhabi are asking what happened to a $1.4 billion payment the fund said it made but which they never received, two people familiar with the matter said.
The disputed payments were related to the purchase of power plants around the world by the Malaysian fund in 2012. A state investment fund in Abu Dhabi, the International Petroleum Investment Co., or IPIC, guaranteed the $3.5 billion in bonds that 1MDB issued to finance the purchase, according to the bond offering documents. In return, IPIC was to receive options to buy a 49% stake in the power plants as well as collateral for the bond.
According to 1MDB’s financial statements, the Malaysian fund made a collateral payment of $1.4 billion. A draft report into 1MDB’s activities by Malaysia’s auditor general said the payment went to a subsidiary of IPIC called Aabar Investments PJS.
The problem is that IPIC’s consolidated financial statements contain no reference to the receipt of the payment. Two people familiar with the matter said IPIC and Aabar never received the money. It isn’t clear what happened to the funds. 1MDB didn’t respond to requests for comment.
Since then, even as more news revealed just how extensive the embezzlement and corruption surrounding 1MDB truly were with the explicit involvement of Malaysian PM Najib Razak, the Abu Dhabi money was never found.
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Fast forward …read more
Source: Malaysia CDS Spike After Abu Dhabi Puts Scandal-Ridden 1MDB In Default
