The proposed sale of a 60 per cent stake in the Bandar Malaysia township, which has now been aborted, was part of a three-pronged approach by the Malaysian government to retire the massive US$11 billion (S$15.4 billion) debts of state fund 1Malaysia Development Berhad (1MDB).
The government calls the debt workout plan by a more neutral name, "1MDB's rationalisation plan". The debts were mainly caused by borrowings through the bond market to buy power plants and an abortive plan to develop an oil field which critics say was a cover to launder money. Opponents of the state firm contend that 1MDB paid high costs for the bond issues.
A big chunk of the funds, some US$3.5 billion, went missing after it was banked into accounts in the British Virgin Islands that have since been closed.
The government, through the Ministry of Finance, has today undertaken the work to wipe out the fund's debts and in negotiations to settle its dispute with Abu Dhabi's wealth fund.
The Najib administration is widely seen as being keen to see the 1MDB troubles fade away as Malaysia approaches the next general election that must be called by the middle of next year.
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The government changed the name of 1MDB Energy in 2015 to Edra Global Energy when it was trying to list the energy assets in 2015.
1MDB Real Estate Sdn Bhd, owner of the Bandar Malaysia township, has changed its name to TRX City Sdn Bhd.
The moves to retire the debts involve:
• Selling the 13 power plants in six countries grouped under Edra Global Energy to China General Nuclear Power Corporation for US$2.3 billion, in November 2015.
• Selling a 60 per cent stake in Bandar Malaysia to Malaysia's Iskandar Waterfront Holdings and China Railway Engineering Corp, for RM7.41 billion. This was announced in December 2015, but has now been aborted.
• Resolving the financial dispute with Abu Dhabi's wealth fund International Petroleum Investment Co (IPIC).
The two countries announced two weeks ago that 1MDB will pay US$1.2 billion in two instalments in July and December to IPIC.
IPIC asked a London court to arbitrate last year in a dispute with 1MDB, in which the Abu Dhabi group claimed about US$6.5 billion.
A version of this article appeared in the print edition of The Straits Times on May 05, 2017,
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