1MDB officials in Abu Dhabi over dispute with IPIC

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KUALA LUMPUR: A 1MDB delegation is in Abu Dhabi for talks with senior officials of International Petroleum Investment Company (IPIC) on resolving a dispute between the two sides.

The Wall Street Journal quoted “a person familiar with the matter” as saying this.

IPIC, earlier last month, filed a claim with a London court to arbitrate against 1MDB and the Malaysian Finance Ministry for US$6.5 billion, according to The National.

Four years ago, IPIC guaranteed US$3.5 billion of 1MDB bonds but claims it has not received payment for the guarantee or other monies and interest owed. IMDB, however, says it made the payments to an IPIC subsidiary.

The National said IPIC and Mubadala Development Company announced yesterday that they would merge. The combined group would be worth US$127 billion.

Their merger is part of Abu Dhabi’s effort to diversify its economy beyond oil.

The WSJ pointed out that the merger meant IPIC was “disappearing”, similar to the status of 1MDB.

Most of the assets of 1Malaysia Development Bhd have been sold or transferred to the country’s Ministry of Finance.

The WSJ reported that IPIC yesterday announced a US$2.6 billion net loss, amid lower oil prices, and said it was taking a US$3.5 billion provision related to guarantees it gave for a pair of 1MDB bonds.

It said that in a filing yesterday, IPIC gave new details about its dispute with 1Malaysia Development Berhad.

IPIC guaranteed bonds worth US$3.5 billion in 2012, and 1MDB agreed to pay US$1.4 billion in collateral to the Abu Dhabi fund. But the payment — and another US$2.1 billion in subsequent payments over the next several years — were instead made to a company in the British Virgin Islands that had a similar name to a bona fide subsidiary of IPIC, said the WSJ report.

“That British Virgin Islands company had a similar name to the bona fide Aabar Investments PJS, but IPIC has said repeatedly that the British Virgin Islands-registered Aabar was never part of its corporate structure”.

“What complicates the matter even more is the British Virgin Islands company was set up by IPIC’s former Managing Director Khadem al Qubaisi, who was forced to resign from IPIC last year and has since had his assets in the UAE frozen by authorities”. He declined to comment when asked by the WSJ.

According to the report, 1MDB has argued in private negotiations that the role of Khadem and another former executive from the IPIC subsidiary in the British Virgin Islands company, as well as the existence of a document showing the British Virgin Islands company was owned by the genuine Aabar, prove IPIC should take responsibility for at least some of the missing money.

In its filing yesterday, IPIC said it was also investigating “other companies outside the group’s corporate structure” that were “incorporated in other offshore jurisdictions using variations of the ‘Aabar’ name.”