1MDB sells $2.4b land stake to cut debt

DEBT DEALS: Malaysia's state fund 1MDB is in the process of rationalisation to reduce its RM42 billion debt. Its latest move involves selling its stake in a project to develop a former air base outside Kuala Lumpur.


    Jan 01, 2016

    1MDB sells $2.4b land stake to cut debt


    MALAYSIA'S troubled state fund 1Malaysia Development Berhad (1MDB) said yesterday it had agreed to a US$1.7 billion (S$2.4 billion) sale of property to a Malaysian-Chinese consortium, as part of its bid to cut its massive debt.

    1MDB will sell its 60 per cent stake in Bandar Malaysia Berhad to Iskandar Waterfront Holdings (IWH) and its partner, China Railway Engineering Corp (CREC), the fund said in a statement following signing of the sale agreement.

    IWH, a partnership between a Malaysian private company and a Johor government entity, will hold 60 per cent of the venture buying the 1MDB stake, while China's state-owned CREC will hold the rest, 1MDB said, adding that the sale should be completed by the end of June.

    1MDB will receive a 10 per cent deposit, or RM741 million (S$244 million), upon the execution of the agreement.

    Bandar Malaysia is developing a 197ha air force base in Kuala Lumpur into the country's first integrated transit-hub, mixed-use cluster, reported the Malay Mail online newspaper.

    Just 7 km away from the city centre, the development will serve as the capital's gateway for a high speed rail-line linked to Singapore.

    The consortium valued the land parcel at RM12.35 billion.

    According to 1MDB, the project will be developed over 15 to 25 years and its sale value is estimated at RM150 billion.

    The consortium beat a group involving Qatari investors in bidding for the project, reported Bloomberg.

    Following the agreement, CREC is now likely to be picked to build the high-speed rail connecting Kuala Lumpur and Singapore, according to Reuters.

    1MDB embarked on a rationalisation plan in June, starting with a share swap deal with Abu Dhabi-based International Petroleum Investment Company.

    In November, it sold its priced energy assets Edra Global Energy to China General Nuclear Power, another state-owned entity, for US$2.3 billion.

    The two deals will reduce 1MDB's RM42 billion debt by RM24 billion, but critics contend that the fund and the government of Prime Minister Najib Razak, which owns 1MDB through the Finance Ministry, are selling key national assets to foreigners, reported the Malay Mail online newspaper.

    But 1MDB president Arul Kanda dismissed yesterday the claim as inaccurate, saying that IWH's involvement in Bandar Malaysia meant the country still owns 54 per cent of the project.

    Reduction of 1MDB's debts has been a urgent task for Mr Najib after US$700 million was found to have been deposited in his private accounts.

    Foreign news reports cited evidence that the money had been channelled through 1MDB-linked companies.

    1MDB faced cash-flow problems after a planned initial public offering of its energy unit was delayed due to unfavourable market conditions.

    The listing was later canceled as the company opted to sell the assets.