1MDB's bonds trading at risk premiums of junk bonds

Singapore

1MALAYSIA Development Bhd's bonds are trading like junk as investors seek greater clarity over the state investment fund's plans to wind down and sell off assets.

Investors are demanding a 441 basis-point premium over similar maturity Treasuries to hold the Kuala Lumpur-based company's securities, compared with an average of 413 for speculative-grade quasi-sovereign notes in the region, a JPMorgan Chase & Co index shows. Its US$3 billion of 4.4 per cent notes due 2023 closed at 86.72 US cents on the dollar on Feb 16, a record low. They fell 0.2 cent to 87.90 US cents on Tuesday.

1MDB said last week that it won't undertake any new investments after it sets up separate entities for property projects and raises cash from selling its power business. The group settled a RM2 billion (S$747.4 million) loan on Feb 13, after two repayment deadline e…