By Chan Quan Min
Arul Kanda
Self-styled strategic investment fund 1Malaysia Development Bhd (1MDB) has fully redeemed its investment of US$2.32 billion (RM8.24 billion at today’s exchange rates) in a Cayman Islands registered fund, according to a statement issued this morning.
“Following a commitment made by the chairman of the board of directors … 1MDB can confirm that it has now redeemed in full the US$2.32 billion invested by the company in a Cayman Islands registered fund,” said Arul Kanda, the fund’s president and group executive director.
Kanda was appointed to the post earlier this month replacing previous CEO Mohd Hazem Abdul Rahman.
“1MDB hopes that the redemption of these funds, in full, draws a line under this matter.” Kanda said.
“These funds originated from the repayment of a loan provided to PetroSaudi in 2011, in the form of murabaha notes, following the termination of an earlier agreement to enter into a joint venture with the company.
“The notes, which were paid back in full — with interest, were subsequently invested in a fund under the regulatory supervision of the Cayman Monetary Authority,” he explained.
“1MDB had previously redeemed US$1.22 billion, representing 60% of the funds invested, and has now redeemed an additional US$1.1 billion, representing the remaining balance of … that was originally invested.”
The statement however does not specify where the money is currently being held. Recent reports say the fund missed a loan payment of about RM2 billion timed for the end of 2014.
Opposition politicians have critised 1MDB’s Cayman Islands investment for making no financial sense because the cost of borrowing is said to be higher than the return on investment.
Following the recent slide in the value of the ringgit against the US dollar, the value of the investment in ringgit terms has increased by about 8%.
1MDB became a “participating shareholder” of the Cayman Islands fund manager, itself a specific type of structured investment company called a Segregated Portfolio Company (SPC), in September 2012 with an investment of US$2.32 billion (approximately RM7 billion at September 2012 exchange rates)
The identity of the fund manager was unknown until it was revealed last year to be a little-known firm called Bridge Partners, based in Hong Kong.
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