1Malaysia Development Bhd (1MDB) rounded up the year with the sale of a 60% stake in Bandar Malaysia for RM7.41bil

1MDB seals RM7.41bil sale

BY RAZAK AHMAD, FIRDAOUS FADZIL, EUGENE MAHALINGAM, AFIQ ISA, JOASH EE DE SILVA, andVINCENT LIAN
THE STAR

KUALA LUMPUR: 1Malaysia Development Bhd (1MDB) rounded up the year with the sale of a 60% stake in Bandar Malaysia for RM7.41bil, a transaction that marks the final part of its six-month debt rationalisation plan.

The transaction values the entire 486-acre Bandar Malaysia at a staggering RM12.35bil.

The land, which 1MDB acquired from the Government in 2013 for RM400mil, is valued at RM4.2bil in the fund’s books now.

The deal marks the third and final component of the troubled fund’s six-month rationalisation plan to reduce the RM42bil debts that led to its cash-flow problems.

Following its cash-flow problems, 1MDB president and group executive director Arul Kanda Kandasamy presented the rationalisation plan to the Cabinet on May 29.

The first component of the plan was a debt-for-asset swap with Abu Dhabi’s International Petroleum Investment Company (IPIC) on May 29.

Arul Kanda said IPIC has started paying interest on its two-guaranteed bonds related to the deal, adding that the transaction value was worth about RM16bil.

The second component was the sale of its power unit Edra Global Energy last month to China General Nuclear Power Corp, in which the cash equity and debt transfer is worth about RM17.3bil.

The power plant sale was also a landmark deal because, for the first time, foreigners were allowed to own 100% of power plants, forgoing the previous cap of 49%.

Arul Kanda declined to elaborate on 1MDB’s remaining debts, saying that an announcement would be made in due course.

With the sale of the 60% stake in Bandar Malaysia to the consortium, 1MDB’s rationalisation programme is however nearly complete.

The latest transaction paves the way for the development of Bandar Malaysia, along with the world’s second largest underground city and high-speed rail connectivity to Singapore.

A 60:40 consortium comprising Iskandar Waterfront Holdings Sdn Bhd (IWH) and China Railway Engineering Corporation (M) Sdn Bhd (CREC) signed a share sale and purchase agreement with 1MDB to buy the 60% share in Bandar Malaysia.

“At the end of the year, which is also the end of the six-month rationalisation period promised by Prime Minister Datuk Seri Najib Tun Razak, we have achieved the final piece of the puzzle, the monetisation of our stake in Bandar Malaysia,” Arul Kanda said at a media conference after the signing ceremony.

With the consortium acquiring 60% of Bandar Malaysia, the remaining 40% will remain with 1MDB, which is 100% owned by the Minister of Finance Inc (MoF Inc).

Besides paying RM7.41bil for its 60% share of Bandar Malaysia, the consortium together with the existing shareholders of the project will have to assume the remainder of Bandar Malaysia’s obligations.

These include the Pengkalan Udara Kuala Lumpur (PUKL) air force base relocation which in total costs RM2.7bil and a sukuk bond with the notional value of RM2.4bil.

Asked if 1MDB’s 40% stake in Bandar Malaysia will be transferred to MoF Inc, Arul Kanda said there was a consideration to do so.

“No decision has been made but it is an option as envisaged under the rationalisation plan,” he said.

It is understood that MoF Inc is considering such an option in order to maximise Bandar Malaysia’s development potential and the future value of its strategic assets without being bogged down by the allegations that have been hurled against the company.