Greetings

Monday, June 01, 2015

As simple as withdrawing FD before maturity


Last week and the week before was quite occupied with various meetings with various level of people on the 1MDB matter.

Many versions and views of the good, the bad and the ugly kind was heard. There was also the beautiful and conspiracies. Not missing also are stories of unfulfilled dreams.

The reason to meet various VIPs and VVIPs is nothing more than to seek truth. One chance meeting with Minister at a secret hideaway outside the city was a useful guide.

The Minister said, "We have to focus on our role and work. Put politics aside and address the problem. So the audit by the Accountant General is useful to understand the situation."

A question arise. "Will the terms of reference for AG identify where the fault lies?"

The Minister's answer was firm.

"Lets leave the politics to politicians. The last audited account was March 2014. It is now end of May 2015. We need to ascertain the financial positions, its liabilities and more important, the financial commitments. Only then can we know what to do next. We have to move forward..."

The Minister is not inside Ministry of Finance, thus does not have access to the full information on 1MDB. However, the Minister is quite aware of the perception from certain relevant segment of the public and there was interesting rumours exchanged.  

Husni's statement

That was before last Friday's presentation to the cabinet on proposals to address 1MDB.

When Dato Husni Hanadzlah issued a statement for the Minister of Finance and as the appointed spokesman for MoF on 1MDB matter, it was in sync with the idea of moving forward in the conversation in that meeting.

The statement below:


However, the following portion of the statement mislead the public and became fodder for the critics to spin: 
Given the above, I am pleased to announce that 1MDB has entered into a binding agreement with the International Petroleum Investment Company (“IPIC”) and its subsidiary Aabar Investments (“Aabar”). As part of this agreement, IPIC will make a payment of USD 1 billion, on or before 4 June 2015. This USD 1 billion payment will be used to repay a USD 975 million (RM3.5 billion) loan, in advance of its due date, to a syndicate of international bank lenders. The agreement will also include further measures to comprehensively address the various financial asset and liability transactions between the parties, further details of which will be announced in due course.
Husni should have explained briefly what the binding agreement was about.

By saying it is an agreement that enable 1MDB to get USD1 billion to pay the USD 975 million, it opens 1MDB to all sort of speculations, new allegations and adding to the existing piles of slanders that need lengthy explanation to the simplistic one liner conclusion and accusations.

TMI twist it as IPIC paying for 1MDB loan. 



This opens up the allegation by Tony Pua and Lim Kit Siang that 1MDB had sought the help of loan shark.

The Sinar Harian frontpage below was twisted by one lost challenger for an UMNO Divisional Leader position as 1MDB borrowed from IPIC to pay a borrowing thus increase 1MDB borrowing.


Not sure how the accounting works out but it is a useful lie to scare off the gullible grassroot.

No bailout

A simple analogy to the "binding agreement" is similar to a 6-month Fixed Deposit that has to be withdrawn before maturity out of some immediate needs for money. It enables the money to be withdrawn before the maturity of the deal.

So it is not a case of new borrowing or loan shark.

Neither is it fresh capital injection which will invite accusation of dilution of Government or rakyat interest in 1MDB. Confidently, it is not a bailout as openly opposed by Khairy. Petronas money is not touched as a bailout piggy bank. 


It is non-sensensical to say that it is new borrowing to cover for expiring loan to Deutsche Bank in which it is claimed that the Deutche Bank borrowing was to invest in IPIC.

This is not a case of  "korek lubang tutup lubang" too. This is an advance payment by IPIC for an agreement that involves settlement of various assets and liabilities between the parties.

Debt reduced by RM16 billion


This swap of USD financial assets with USD liability will efficiently and in a faster way easily reduce debt by RM16 billion.

If that is too complex for majority and easily duped by perception layman, another example is a reverse repo to withdraw money placed under repo (repurchase agreement).

They new reverse repo deal structured with maturity date to match exactly with the original repo. The reverse repo rate will include penalties so the earning from the earlier repo "deposit" will be less or none.

If that is still not comprehensible, butt out of complex corporate deals and talk of more relevant bread and butter issue. One Minister asked a yes or no question last week. "Is this a business issue or government issue?" All present answered, "Business."  

Since the "binding agreement" is linked to earlier deal, it has to be on a new term. FD withdrawn will be forfeited interest or charged penalties.

This IPIC deal will be matched against the much accused US dollar asset from the liquidation of Petrosaudi investment the from the early days of TIA kept at BSI Singapore. It proves that sovereign wealth fund backed "asset" from the PetroSaudi JV and Murabaha has value and not a fake as slandered by many parties. Refer to Appendix A at the end of this posting.

It is only fair for 1MDB to forfeit the asset in BSI Singapore's custody to match this unplanned withdrawal.

And, it is also fair on 1MDB to take that option since detractors of 1MDB have scarred off banks, railroad Edra Energy listing, pressured land buyer Tabung Haji to forcesell, and applied political pressure on KWAP, EPF, PNB and TH from participating in any investment scheme by 1MDB.

Will not be surprised stationary supplier at Jalan Pudu are pressured not to supply papers and computer printer ink to 1MDB by DAP goons.

The different between this "binding agreement" and a simple FD withdrawal is that it is not only a single deal like FD but will involve "further measures to comprehensively address the various financial asset and liability transactions between" IPIC and 1MDB. The list of transactions between them in Appendix B at the end of this posting.   

What can the USD 1 billion from IPIC do?

It could retire the borrowing to Deutsche Bank that is due to mature sometimes in August or early September. And it help free up asset and the restructuring of 1MDB into separate operational entities.

Critics

One critic of this transaction is that it is an acknowledgement that 1MDB is in trouble. Jebat Must Die wrote it here.

Going by the same argument, few commentaries in some news portal asked that the AG report and PAC should be cleared first to identify the problem before the next course of action. This is similar to the Minister's view and it is not wrong.

Maybe and it is still guessing, the situation has been ascertain and to wait for the formal AG report, PAC, and inter- and intra- UMNO political exchanges will be too long. The immediate financial commitment need be met.

As far as the critics by JMD, it is nothing new.

In one of his statement to parliament, Husni acknowledged 1MDB is not financially sustainable. Dato Abdul Wahid Omar told a similar explanation in a closed door Pemuda UMNO event. [read Rocky Bru here]

Dato Najib mentioned his willingness to hear comments against the business model of 1MDB in the TV3 interview. This is something most commentator missed out but not this blogger. Extract from NST report, below:
"We can question (1MDB's) business model and I am prepared to hear different views on that. But I will not condone or accept any instances where funds were "vanished" or siphoned (by other parties), to make a film for example."
The PAC proceeding which has no significance can proceed. The political brickbat can continue till Najib is forced to resign or one faction lost out or UMNO met its demise.

Such cheap spins are going around to implicate Najib's son at Deloitte Consulting, Arul Kanda's absence at PAC, rumour created of 1MDB non-cooperation with auditor, Immigration Director statement on Arul's whereabout, first generation IPP award, CIMB foreclosure on Khairuddin, RM50 billion lawsuit against Tun M, etc.

Which ever side is talking, tell the truth because only the truth should matter. The truth should set us free from the shackles perceived.   

------------------------


Appendix A: Brief on the Petrosaudi deal

1. 1MDB invested a total of USD1.83b with PSI, initially as equity, then subsequently as a Murabaha facility carrying a 8.67% p.a. profit rate.

2. From these investments, 1MDB made USD1.058 billion.

3. In the years 2010 and 2011 , 1MDB received a total dividend in cash of USD265m from the Murabaha facility. This was recorded as RM332m (USD106m) and RM512m (USD159) dividends received in the 2011 and 2012 Audited Financial Statements (AFS) respectively.

4. 1MDB eventually exited its relationship with PSI in 2012 with USD2.318b. This generated a profit of USD488m. This was recorded in the AFS for 2013.

5. The USD2.318b was placed in funds under mgmt custodized with BSI Bank and as at Dec 2014 had received cash dividends from the funds under mgmt totaling USD267m.

6. In the Audited Financial Statement for 2014. it was recorded as a dividend of USD131.70 million as at March 2014.

7. In October 2014, 1MDB redeemed USD1.22b in cash from these funds as reported in AFS 2014.

8. In Nov 2014, it further redeemed USD170m in cash leaving behind funds under mgmt of USD939.9m

9. By June 4, it would have fully redeemed the last USD939.9m in Units towards full early settlement of the Deutsche Bank facility.

10. To summarize, for the initial investment of USD1.83b, 1MDB has fully received USD2.858b in capital gains and dividends.

11. This means, NO MONIES were missing from the PSI deal, and USD1.058m CASH returns (56.2% gross returns) was made from the PetroSaudi-1MDB venture.


------------------------


Appendix B: 1MDB- IPIC

1) USD1.1 billion (RM4 billion) in BSI Singapore
- Held as collateral for a Deutsche Bank USD975m loan and is apparently not cash but Financial Assets in the form of sovereign-guaranteed investment units).
- This asset is supposed to yield returns.

2) USD1.56 billion (RM5.68 billion) invested in a 2013 JV with Abu Dhabi Govt
- The 50-50 JV is called Abu Dhabi Malaysia Investment Company Limited
- JV is with Abu Dhabi government-owned Aabar Investments PJSC and is to jointly invest in energy and strategic real estate.

http://www.reuters.com/article/2013/04/16/malaysia-1mdb-aabar-idUSL3N0D31US20130416

3) USD1.4 billion (RM5.1 billion) with IPIC

- International Petroleum Investment Co (IPIC) is a sovereign fund wholly owned by the Abu Dhabi Govt and has assets worth USD65 billion
- The money is a part of the USD3.5 billion 2012 bonds that is co-guaranteed by IPIC and 1MDB and appears to be IPIC's share of the funds.

4) USD1.25 billion (RM4.55 billion) refundable deposits with Aabar Investments
- This appears to be a deposit for the options of Abu Dhabi govt Aabar that is tied to the IPO of 1MDB's IPO assets.

In total USD5.06 billion (RM18.43 billion) of the famous RM42b seems to be stuck in various ventures with the Abu Dhabi Govt

Understanding that foreign investment is bi-lateral, it appears that the JV is just not for investments into Malaysia but in both countries.

In fact multiple partnerships a signing was announced in March 2013 where it stated that
http://www.1mdb.com.my/press-release/rm18-billion-strategic-partnership

"The various partnerships are the outcome of continuing talks between PM Najib and Abu Dhabi’s Crown Prince and Deputy Supreme Commander of the Armed Forces of UAE, His Highness General Sheikh Mohamed Bin Zayed Al Nahyan, promoting long-term sustainable economic growth beneficial to both countries."
Definitely bi-lateral investments on both sides.

Extract taken from compilation by Lim Sian See Facebook

27 comments:

Anonymous said...
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Anonymous said...
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Yumi said...
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Anonymous said...
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Anonymous said...

Anon 2.03pm agree with you.

ATBW, did you ever heard any govt. (Meaning dev. Country) Doing business/investment in such massive, large scale?

Did you ever heard any ordinary rakyat kickstart a new business in such massive, large scale ?

By the way whose money did Najib used? Do you think Najib have the ability? If Najib dont have the ability, then who run the show?

Are we going into a failed state?

Anonymous said...

So tat will explen where the money goes,none of it went to hollywood or some kaki enjoy penang born bisnesman like madey's claim..no doubt 1mdb cant replicate the madey's perwaja at making money..but whats more important is,its not as bad as what we heard from madey..should 1mdb file a lawsuit on him ?

Talk not bull said...
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Anonymous said...

11:46 PM

Why should the govt have an investment agency that is off-budget?

Companies borrow to buy properties to develop for a higher returns. Purchase of machinery is included in this development for enhanced returns.

And key criteria - never borrow money with overly HIGH interest rates - proof that the sitting PM is clueless about business

and he conveniently "raided" KWAP, TH and lately TNB for easy cash to repay loans??

even kindergarten kids will laugh at this blur sotong PM

Yumee said...

So when is it can we see 1mdb posting profit? You know the fine details so do share. As it stands, this article addresses nothing. We want to see bottom line. As it stand, i, a taxpayer, am a stakeholder in 1mdb. So when can i expect a return on my tax paid? Address the question. Doubt you could as you fail at a simple task such as spelling

A Voice said...

This posting serve to explain that the deal is not a bailout or new borrowing or new capital injection.

Other issues will be done in good times should it be necessary or relevent like profitability, and deutsche bank demand for payment. We are not government and under no obligation to answer certain request. Yours and our tax dollar was not received to entertain such demanding request.

Totally misplaced.

Btw was there any confirmed report, I REPEAT, CONFIRMED report of deutsche demanding early payment. Sarawak Report does not constitute legitimate source.

So does the allegation that 1mdb money being diverted for moviemaking. Too bizarre and stuff of movies but lets have the proofs out first. Accusing without justifying and substantiating tantamount to slander and lying. No credibility.

Lawsuit serves to put absolved the wrongly accused. That cost money ... Lots of it. It is easier for the public to demand the accusing party to present the proofs and not use the legal coverup of asking questions and placed burden on the accused.

11.08 ... Tthere are lots of cases in Msia, dulu, kini dan selamanya and in the various states. The amount is relative. If the principle of SOE should be abolish, then lets just sign the TPPA. We don't quite agree and so do Tun M.

11.48 ... Do you know that the biggest off budget agency is petronas? Only recent times did petronas announced the accounts. There is still no requirement to declare to public.

The key issue on 1mdb is about companies assuming risk and governance issue. However risk is about knowledge and rakyat need to be educated and convinced that the highly leverage 1mdb hedged its risk. Some kind of answer needed.

Off course allegations on lesap needs prrofs beyond ability to do BoDMAS ... Bracket of division, multiplication, addition and subtraction. The calculation left out at least 5 to 6 items on the balance sheet. How convenience.

Is there insufficient issues that our spelling and grammar has to be questioned.

Go ahead to not agree but the basis and fact for the allegations has to be right. Suspicions and putting two and two together are not fact but mere suspicions.

Nisfu syaaban greetings to the muslims and may we be all remain on the righteous path. Lets not commit qazaf of the non sexual kind.

Anonymous said...

Dear Brick

“Where there's smoke, there's fire” - you would not want to witness your house getting TOTALLY burnt by standing idly by to catch sight of fire befor you rush to get help, do you?

You would say to yourself, "Smoke alone does not mean fire", so you need TIME to convince yourself while the fire burns and burns and burns ...

By the time you get yourself convinced, there is nothing to save!

This phase is the "verification" stage where concerned citizens asks questions like, "Hmmm I don't like the look of that smoke - it is not smoke from cigarettes, not smoke from bonfires - it is really massive, blackish smoke."

"I better take precautions, I should call the relevant authorities - better SAFE than sorry".

Brick, you get my point?

Anonymous said...

Tanya pada pokok apa sebab goyang,
Nanti jawab pokok angin yang goncang,
Tanya sama angin apa sebab hujan,
Nanti jawab angin tanyalah awan.

Awan nanti kata aku kandung air,
Sampai tempat sejuk aku pun cair,
Lihat dalam air nampak bayang-bayang,
Campak satu batu bayang pun hilang.

A Voice said...

My dear commentators

This haze has been around long. It is not like I am saying 1mdb is halaalan toyyiba. Have been the radar since 2009.

By now the info piled up by detractors would have been sufficient to nail 1mdb without any lies, spin, and fabrication.

What is holding them?

Maybe the smoke os a bunch of smokers puffing cigerettes in a big group. It could riza aziz using dry ice to create fog for his latest movie.

I can take a firm position based in only smoke or hot air.

By the way, talking about goyang. The last person that sang najib sudah goyang and sabah dah hilang was anwar ibrahim.

Immediately 18 cabang karam and see what happen to him.

Firm up the allegations. Layman arguments are not enough. It only convince the gullible simpletons.

A Voice said...

Corrections:

Have been on our radar since 2009.

I can't take a firm position based in only smoke or hot air.

Addition:

Rumour going around of Jho Loh is in town. Should tangkap.him.

But what did he do wrong if he merely volunteered and any suggestions he made was approved by BOD, BOA and MOF?

We used to suspect Petrosaudi was a bogus company. Since money is not squandered, how to say it is a bogus vompany that typically cheat peoples'money?

Keep in smoking

Anonymous said...

Dear Brick

What is Jho Loh's official position? Is he a govt personnel? Or is he just a family friend (read that as crony) of Riza and Rosmah?

Why did he claim that he has the Malaysian Govt backing?

If you were to see dark clouds in the sky, would you say,"Ahh no evidence of rain falling". So you leave home happy as a lark and then get caught in the drenching shower, caught flu and cold and could not work for 1 week.

Falling sick for a week is small matter but government losing 42 billion ringgit means YOU, your family and your descendants WILL be working off your butts to pay back big time.

So don't wait for CONCRETE evidence before starting your cautious queries, especially if the signs are all there for all to see, to smell, to hear, to think, to INVESTIGATE.

Investigations does not mean accusations, my dear, it simple means asking questions.

Anonymous said...
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Top Up said...

ABITW

I am pro Tun M and believe he has basis to question. Something occurred to me. It seems the comments are coordinated attack against you.

The early comments try hard to divert attentions from your explanation to pose questions away from the subject.

Hope the detractors of 1MDB must start showing proofs and not just smoke.

I can see the need to see where is the RM42 billion disappeared. Please provide the proof or argument to show money has disappeared. It is beginning to be like PAS accusing MAS lost RM8 billion but the P&L does not show.

I still want to believe in Tun M.

A Voice said...

Plainly state your opinion, even if it differs. No hostilities, insults and bad languages be allowed release.

That rule applied. There is no democrasy. It is our call as owner of the blog.

Absolutely no insults welcome. Hmmm ... can't we argue and criticised laced with humour and wit. It is less adversarial and equally if not more effective.

A Voice said...

11:39

Same advice to you. Show me substance not rhetorics.

Anonymous said...

AG will have to suspect some questionable transactions exists before hiring forensic experts to dig up further. That is the proper way to do but it will take a long time to trace. It will only invite more speculations.

On the other hand, allegations need to be substantiated and the current process is how proper investigation is done. Can we be patient?

Probably what need to be done is for police to apply POCA or POTA or whatever law to jail the suspects - Najib, Rosmah, Arul Kanda, Riza Aziz, Jho Loh, etc - without trial to satisfy the rakyat hakim negara judgement.

Be done with justice as long as the public is happy and that ensure a BN win for next GE. Hidup UMNO! Hidup BN!

Anonymous said...

Wow so many comments deleted. Avoid shooting the messengers.

Najib asked everyone to "Tunggu Audit". But he happily carry on making 1MDB decisions.

If there is nothing to hide, why the need for "pemulihan" ekk?

Audit will not uncover wrongdoings. Now that PAC is actively investigating, you can feel the suspects feeling panicky.

If you compare Tun's speeches, Muhyiddin's speeches, there are beneficial takeaways.

But Najib?? Only solidarity (cronyism?), bangang, bengong and pendekar bugis. Kesian.

Anonymous said...

12:34 PM

Jangan lupa rakyat yang MENGUNDI. Jika Najib terus memimpin UMNO akan terkubur. Nama Razak akan tercemar.

Anonymous said...

If sarawak report making slanderous report why cant najib bring the matter to court? Can Somebody advice Najib to take firm action just like singapore? If UK is the place to file the summons hell why not?

ABITW,

Care to explain?

Sir Wenger said...

Er AoB
Well, if they repo'ed the investment units to raise the USD 1 billion, then it's a secured borrowing. This will be against what the CEO said when he mentioned that the transaction with Aabar did not involve additional borrowing. Can't really call this transaction an asset swap as the principal is exchanged , hence it's a repo for all means and purposes. I suppose Aahar structured the interest rate on the loan to be the same as the profit rate on the units. The fact that Husni has mentioned that's this was used to repay the loan is proof that the loan was recalled earlier than expected.

Financially wise, makes sense to liquidat your current assets for cash. But question remains whether Aahar will treat this as a sale or a repo of some term .

Issu here is that there are very few details , maybe tomorrow they will be revealed? In the mean time the score is still Public Funds 1 billion 1mdb 0. That's an issue and 1mdb must rectify this ASAP.

But Bumi land is perhaps gone and that should be a cause for concern to some. This land was sold and it's proceeds used to equitise 1mdb balance sheet and provide liquidity . Cost of the debacle rm 1 billion and loss of land. Enough to be forgiven? Your views sir, please.

Anonymous said...

I'm just wondering did anyone asked the most fundamental question?

"Why the need for 1MDB in the first place when we already have Khazanah, PNB, Tabung Haji, EPF, etc. "
Can anyone tell me, hasn't all these investments done by the other big sovereign funds yield better results year-on-year, and proven to be successful and also contributing to nation development already?

Why?

A Voice said...

Anon 1:49

I've got to remove the exchanging of insults - be it against or for me. It detour the comments from sensible discussion.

Anonymous said...

Now that 1MDB has published its debt chart, can somebody explain why financial cost (not including interest) even if based on 42Billion debt stood at more than 10%? The Star Online reported that actual monetary financing amount is only 13+ Billion which translate into more than 35% financing cost!

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