‘New debt crisis’ looms at 1MDB-linked SRC

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PETALING JAYA: A looming debt crisis hangs over former 1MDB subsidiary SRC International, which borrowed RM4 billion from a civil servants’ pension fund, according to a Singapore news report.

Malaysian government negotiators were seeking a China-led takeover of SRC assets in return for fresh capital that will help finance the 10-year loan from Kumpulan Wang Persaraan (KWAP), according to the Singapore Straits Times.

In a report from its Kuala Lumpur correspondent, the newspaper said SRC International was struggling to make annual interest payments and would face a challenge early next year when it is due to make interest payment and part repayment of the principal amount.

KWAP is the pension fund of the country’s 1.6 million civil servants and the report said SRC’s problems could pose a fresh headache for Prime Minister Najib Razak.

SRC International was set up in early 2011 to pursue strategic overseas investments in energy resources. It was a subsidiary of the government’s troubled investment arm, 1Malaysia Development Berhad, which is fully-owned by the finance ministry.

The subsidiary company, which has since been taken over by the finance ministry, has been linked to a deposit of RM42 million into Najib’s private bank accounts in 2013. The prime minister has said he was not aware of this.

The ST report said SRC pays RM164 million in annual interest to KWAP. However it must pay RM660 million next year, and RM964 million in 2018, as it pares down the principal amount.

“This needs to be resolved and one option being considered is the sale of the company’s assets and liabilities to a new party,” said one financial executive, who has been involved in the corporate restructuring at 1MDB, according to the report.

The report, quoting SRC’s 2014 annual report, said the company had RM305.6 million in investments in Malaysia and RM3.8 billion overseas, and reported a loss of RM164.5 million for the year ended March 2014.