1MDB debt: Ananda Krishnan settles $560m, Petronas bond yield impacted

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Malaysian tycoon T Ananda Krishnan has bailed debt-laden 1Malaysia Development Bhd (1MDB) out, helping the strategic investment firm settle a MYR2 billion ($560 million) loan last Thursday, six days before bankers triggered a default.

Local media quoted sources saying that the payment was received by the banks involved hours after the bailout was agreed upon.

The payment is a last-minute reprieve for 1MDB, Malaysian Insider said, as the deadline was February 18.The MYR2 billion loan was guaranteed by Ananda’s company Usaha Tegas.

Also Read: Tycoon Ananda Krishnan to 1MDB’s rescue?

Malaysia’s Maybank has 58.99 per cent of the MYR2 billion loan while RHB has 32.41 per cent. The other lenders are Alliance Investment Bank Bhd (4.06 per cent), Malaysia Building Society Bhd (3.24 per cent) and Hwang DBS Investment Bhd (1.29 per cent).

The development fund, which owns a large portfolio of power plants, had missed payments on the bridge loan that was due end-December and its lenders are keen to see it paid before they had to write it down in first-quarter earnings, bankers said.

1MDB subsidiary, Powertek Investment Holdings Sdn Bhd, took the loan last May to refinance a MYR6.17 billion bridging loan taken in 2012 to part finance the purchase of power assets.

1MDB restructured the MYR5.5 billion bridging loan into two tranches: a MYR3.5 billion loan due by August 2024 and a MYR2 billion loan due last November, according to data from LPC, a Thomson Reuters unit specialising in loans.

Also Read:1MDB CEO resigns, Abu Dhabi banker takes helm

Meanwhile, Bloomberg also reported that 1MDB debt woes have impacted national oil company Petroliam Nasional (Petronas).

The yield premium on Petronas’s 2022 US dollar-denominated debt over Treasuries has surged 53 basis points in the last six months, after the government said it was not liable for 1Malaysia Development Bhd’s debt and the fund missed a loan payment.

According to the wire’s report, the timing was unfortunate for Petronas, which was planning its first dollar bond in five years to raise and estimated $7 billion, said sources familiar with the matter.

In response to questions from opposition law-makers, the government had said on October 29 that it was not liable for 1MDB’s debts, if the company went bankrupt.The premium over US Treasuries paid by 1MDB bonds (due 2023) climbed 47 basis points during the seven trading days, following this announcement.

The cost of insuring Malaysian sovereign debt reached a 16-month high on January 13, one week after the local media reported 1MDB’s missed payment. It is up 27 basis points since December 31.

Fitch Ratings said last month it may downgrade Asia’s only net crude exporter, citing plunging oil prices and “uncertainty” surrounding finances of the investment fund, whose advisory board is headed by country’s Prime Minister Mohd Najib Abdul Razak.

Also Read:1MDB calls off $2.4b Islamic bond issue

“The 1MDB mess is being factored into the spreads for Malaysia and there are not that many bonds in which you can express that view,” opined Dilip Parameswaran, the Hong Kong-based head of independent advisory firm Asia Investment Advisors.

“That, mixed with lower oil prices and a potential downgrade of the sovereign, are all weighing on Petronas.”

Petronas spokesperson did not reply to an e-mail or answer phone call seeking comment on this development; spokesperson for 1MDB declined to comment.

1MDB has its origins in Terengganu Investment Authority, which was created in 2009 to invest oil royalties from the state of Terengganu. When Najib became prime minister that year, it was renamed 1MDB, became a national entity and its funding source became government-backed debt instead of oil income.

“It would be very difficult for the sovereign to walk away from paying if 1MDB were to face issues,” Sagarika Chandra, a Hong Kong-based Fitch analyst said on phone on February 12.

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Singapore Reporter/s

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Following vacancies can be applied for (only in Singapore).   

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.