Putrajaya will honour debt obligations, new BNM chief says
MalayMailOnline
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KUALA LUMPUR, May 11 — Bank Negara Malaysia Governor Datuk Muhammad Ibrahim expressed confidence today that the federal government will honour all its debt obligations as concerns linger over 1Malaysia Development Berhad's ability to make a coupon payment on a US$1.75 billion (RM7.06 billion) bond.
Muhammad, who took office May 1, also said he was confident that the state-owned strategic investment fund's move to engage with its US dollar-denominated bondholders to allay concerns over the payment, would help improve market sentiment.
“I am quite confident that the government will honour its debt obligations,” he told reporters at the sidelines of the Global Islamic Finance Forum 5.0 held here.
“The second point is with the resolution of 1MDB it would improve market sentiment,” he added.
1MDB missed a US$50 million interest payment last week amid a dispute with Abu Dhabi's International Petroleum Investment Company (IPIC) over who is required to make the payment.
The move triggered a cross default on the RM5 billion 5.75 per cent local currency bond due in 2039 and RM2.4 billion of notes maturing as early as 2021.
1MDB is due to pay another US$1.75 billion bond coupon this week.
The company has said it is engaging bondholders of its US dollar-denominated securities and has appointed Alvarez & Marsal Asia Ltd. as its financial adviser.
Opposition lawmaker Tony Pua of the DAP had previously pointed out that Putrajaya was liable to indemnity should 1MDB fail to make the payment since the bonds were guaranteed by the Ministry of Finance.
In a statement earlier today Pua, MP for Petaling Jaya Utara, again demanded the government explain if it is still liable for the payment of bonds undertaken by the fund to restore confidence and prevent panic among Malaysians.
