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Cabinet rejects RM3 billion aid for 1MDB

 | February 27, 2015

The cash injection would have to be done within the next five weeks.

1MDBKUALA LUMPUR: Members of the Federal Cabinet, it has been learnt, on Wednesday rejected by a majority an item in the Minutes of the previous meeting on funding the 1Malaysia Development Board (1MDB) to the tune of RM3 billion.

It could not be immediately established why the item was in the draft minutes for reading and confirmation this Wednesday if a decision had not been taken on the matter on Wednesday last week.

The Malaysian Insider quoted an unnamed source on Friday as confirming that “the Cabinet rejected the proposed RM3 billion cash injection for 1MDB”.

1MDB is not a sovereign wealth fund as widely reported but a government-owned company set up for investment in strategic areas. The Finance Ministry gave an initial RM1 million to set up the company. It has also guaranteed several loans in the billions taken by the company and provided letters of support for other loans.

It appears that the RM3 billion cash injection would have to be done within the next five weeks, i.e. by March 31 when 1MDB’s financial year ends.

The Finance Ministry raised RM2.1 billion on February 11 and 12 through two treasury bills which, according to money market dealers, was reportedly for 1MDB.

The company, according to figures available at the end March 31 last year, has chalked up more than RM42 billion in debts, an annual debt serving burden of RM2.31 billion while experiencing a negative cash flow of RM2.25 billion.

Arul Kanda Kandasamy the President of 1MDB, in a brief statement on Monday, recited its oft-repeated mantra that the Ministry of Finance-owned company will continue to issue official announcements from time to time. These, according to him, will be on “our business, the implementation of our strategic review, and our financing arrangements when appropriate and relevant to do so”.

Arul Kanda was commenting on “press reports on Monday regarding 1MDB’s financing arrangements”.

He reminded that 1MDB announced the outcome of its strategic review on 18 February. “We emphasized in the announcement that 1MDB will seek refinancing ‘from the best available sources’.” He pledged that the company would stop new loans, new projects and new investments and concentrate on its core business.

Arul Kanda stressed, that “our 100 per cent shareholder, the Ministry of Finance, will be involved, as relevant and as required, in the interests of maximizing shareholder value”.

He did not elaborate on what he meant by the Finance Ministry being involved.


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