Malaysia’s scandal-plagued state investment fund 1MDB has a 143.75 million ringgit ($36 million) bond coupon payment that may still be due this month. With the company unable to repay debt, the government has said it will honor 1MDB’s obligations as it had done since April 2017.
This is what you need to know about 1MDB’s path to insolvency, the debt commitments that the government’s earmarked 38 billion ringgit for, and who else could be saddled with payments.
What is 1MDB and how did it get so indebted?
1Malaysia Development Bhd. took shape in 2009 under former Prime Minister Najib Razak as a vehicle to drive investment into Malaysia and boost the country’s assets overseas. Early initiatives included buying privately-owned power plants and planning a new financial district in Kuala Lumpur, and it raised more than $8 billion via bond sales to do so.
Plagued by heavy debt and questions about its management and investment decisions, 1MDB grew into a scandal that moved closer and closer to the heart of government, culminating in global probes into alleged embezzlement and money laundering. Investigations and audits suggested not all the money the company raised were used as intended (U.S. investigators allege a small group of Malaysians may have diverted more than $4.5 billion from the fund.)
Malaysia Asks $8.3 Billion Question on 1MDB. Here’s What We Know
Cash flow problems emerged, made worse by a failed attempt to sell shares in its energy unit. 1MDB missed due dates on bank loans and defaulted on coupon payments in 2016 amid a dispute with the co-guarantor of two of its bonds.
What triggered disclosures of 1MDB’s insolvency?
A new government came to power this month in a shock election victory and quickly reopened investigations into the fund. That includes figuring out if any of its money ended up with Najib, who once chaired its advisory board, and reaching out to global investigators who had complained of a lack of cooperation from Malaysian authorities under the previous administration.
Lim Guan EngPhotographer: AFP via Getty Images
The day after Finance Minister Lim Guan Eng was sworn into office, he said the government had been "bailing out" 1MDB since April 2017 in coupon and debt settlement obligations. That was contrary to previous statements by 1MDB that payments were made from the fund’s rationalization exercises, he added.
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