Embattled state-fund 1Malaysia Development Bhd (1MBD) has replaced its chief executive handing over the reins to Abu Dhabi-based investment banker Arul Kanda, who faces a daunting task of turning around the investment company.
The leadership change comes as the debt ridden state investment firm is preparing for a $4 billion initial public offering of its power plant assets.
The 38-year old Kanda, former executive vice-president, head of investment banking group and head of corporate finance division for the Abu Dhabi Commercial Bank, succeeds Mohd Hazem Abdul Rahman with immediate effect.
His appointment comes on the day local media Edge Financial Daily reported that 1MBD had failed to repay a 2 billion ringgit ($563 million) loan due on Dec. 31. The report further added that state fund, mired with losses, had got yet another extension to settle this loan, that was first due at November-end (2104).
Kanda is no stranger to the Malaysian banking scene. He has also served as a non-independent non-executive director of Malaysian bank RHB Investment Bank Bhd from July 2009 to May 2011. Within that banking group, he was also a director of RHB Islamic Bank Bhd and non-independent non-executive director at RHB Capital Bhd in the same period.
Confirming Kanda’s appointment, the state investment fund also said it was undertaking a strategic review to boost returns.
“We intend to examine a full range of strategic and financial alternatives to achieve the greatest value,” its chairman Lodin Wok Kamaruddin said in the statement. “1MDB will continue to execute its on-going initiatives, increase operational efficiencies and improve our financial performance whilst this process takes place.”
1MDB, a government-linked strategic investment vehicle, has been in the news for controversies surrounding its MYR42 billion ($11.87 billion) debt level and for stashing MYR7.18 billion ($2.03 billion) in the Cayman Islands.
Malaysian deputy finance minister Ahmad Maslan had said that 60 per cent of the funds have been brought back while the remaining will be brought back by end-2014. The sum is said to have registered a return of 6 -7 per cent at the end of last year.
Lodin had said that the repatriation of the funds would have exposed them to the fluctuations of the foreign exchange market.
1MDB’s debt, largely denominated in US dollar, is also under the strain of a weaker ringgit. The Malaysian R
inggit has been weakening against the dollar for more than the past six months to MYR3.5338 today.
Kanda is the fund’s third chief executive in five years, and during the period, 1MBD has also had three external auditors and two chairmen.