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    Apr 19, 2016

    Abu Dhabi fund ends its support of 1MDB


    ABU Dhabi's sovereign fund International Petroleum Investment Company (IPIC) said its agreement to support  1Malaysia Development Berhad (1MDB) since 2012 has terminated after the debt-ridden Malaysia state investment company failed to pay it more than US$1 billion (S$1.36 billion) as promised.

    1MDB and Malaysia's finance ministry, its sole shareholder, "are in default" on the the binding term sheet they drew up with IPIC and its unit Aabar Investments in May last year, IPIC said in a filing to the London Stock Exchange yesterday, Bloomberg reported.

    The announcement came amid reports that IPIC had refused to pay US$50 million in interest on behalf of 1MDB, due yesterday, for a US$1.75 billion bond of the Malaysian fund, potentially sending 1MDB into default.

    Under the term sheet, IPIC in June last year provided an emergency US$1 billion to 1MDB to repay a US$975 million loan owed to a consortium of banks, reported the Malaysiakini news website.

    IPIC also assumed the obligation to pay all interest due from 1MDB's US$3.5 billion bonds issued in 2012.

    It would eventually assume responsibility for the repayment of the entire US$3.5 billion sum.

    These were to exchange for 1MDB assets of similar value by June 30 this year.

    IPIC had guaranteed the US$3.5 billion bonds back when they were issued in 2012.

    But last week IPIC denied ownership of a company known as Aabar Investments PJS Limited, to which 1MDB said it had sent US$3.5 billion as payment in 2012 as IPIC's bond guarantee.

    IPIC said it is now considering all its options to remedy the default by 1MDB, reported Reuters.

    These include referring the matter to the appropriate dispute resolution forum, said IPIC.

    It also said 1MDB and MOF must indemnify IPIC and Aabar for any claims over guarantees that IPIC gave for the bonds issued by 1MDB.

    The dispute with IPIC deepens the troubles of 1MDB.

    It is already the target of several global investigations into allegations of money laundering and embezzlement, with Malaysian Prime Minister Najib Razak possibly implicated.

    1MDB has consistently denied any wrongdoing.

    It said yesterday that it has repaid all short-term and bank borrowings.

    It also said it would meet all its "other" financial obligations, reported Reuters.

    1MDB's dollar bond prices slumped yesterday to the lowest since November, according to Bloomberg-compiled prices.