UAE fund says Malaysian fund, ministry default on over $1.1B

AP News
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Posted: Apr 18, 2016 9:49 AM

DUBAI, United Arab Emirates (AP) — A government-backed investment fund in the United Arab Emirates said Monday that heavily indebted Malaysian investment fund 1MDB and the southeast Asian country's finance ministry have defaulted on more than $1.1 billion they owe.

The Abu Dhabi-based International Petroleum Investment Co.'s allegation in a filing to the London Stock Exchange increases the pressure on the embattled Malaysian fund, which faces multiple investigations over alleged financial wrongdoing and is saddled with a multibillion-dollar pile of debt.

IPIC said it has "performed all of its obligations to date" under the terms of an agreement reached in May 2015. It alleged that the Malaysian side has failed to live up to its part of the deal, including the repayment of just over $1.1 billion plus interest. The Abu Dhabi fund said it and subsidiary Aabar Investments have unsuccessfully "extended opportunities" to 1MDB and the ministry, and are now considering their options in resolving the dispute.

In a statement of its own, 1MDB said IPIC last June agreed to assume the Malaysian fund's interest payments on certain debts 1MBD had issued in exchange for the transfer of cash and assets to IPIC. Because of disputes between the two sides, IPIC did not make the latest interest payment due on Monday, 1MDB said.

"1MDB wishes to make clear that it and its group entities will meet all of their other obligations under any other financing arrangements and have ample liquidity to do so," the Malaysian fund added.

A Malaysian parliamentary inquiry into 1MDB this month found billions of dollars' worth of unexplained payments, and it has called on police to investigate the fund's former head. It determined that the fund's debts jumped from 5 billion ringgit ($1.3 billion) in 2009 to 50 billion ringgit ($12.8 billion) this January.

Malaysian Prime Minister Najib Razak was behind the creation of 1MDB in 2009 and has been fighting allegations that cash from the fund flowed into his personal accounts. Saudi Arabia recently confirmed the prime minister's claim that $681 million deposited in his bank accounts was a donation from the Saudi royal family.

Aabar and IPIC last week denied links to another similarly named company that the Malaysian parliamentary inquiry found had received an unexplained payment of $2.1 billion from 1MDB. They said that British Virgin Islands-based company, Aabar Investments PJS Limited, "was not an entity within either corporate group" and that they had received no payments from it.

A day later, the Swiss attorney general's office said it was expanding its own probe into 1MDB to include two unidentified former Emirati officials who had been in charge of Abu Dhabi sovereign wealth funds.

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Associated Press writer Eileen Ng in Kuala Lumpur, Malaysia, contributed reporting.

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