1MDB's new boss sets record straight on key niggling issues

Singapore

MALAYSIA's state-owned 1Malaysia Development Berhad (1MDB) has no plans to repatriate some US$1.103 billion redeemed from its investments in Cayman Islands-registered funds as it will be used to service interest payment on US dollar debts, said the firm's newly appointed boss Arul Kanda Kandasamy.

"There's a very sensible and simple reason for that," said Mr Arul, eager to counter certain perceptions in an interview with The Business Times at his eighth-floor office in the heart of Kuala Lumpur's Golden Triangle.

"We are keeping the money in US dollars as we have US$6.5 billion in bonds out there, in which interest payments come up to nearly US$400 million a year."

The remark by the 38-year- old, whose smiling countenance belies the pressure he faces just one month in the hot seat as 1MDB president and executive director, flies in the face of expectations that the debt-saddled firm would bring back the money to Malaysia to address its mounting debt woes.

"The cash is in our accounts and in US dollars. I can assure you (about that) . . . I have seen the statements," said Mr Arul in an apparent attempt to calm rising anxiety over the status of these funds parked offshore which were managed by little-known fund managers.

This US$1.103 billion is the second tranche of funds totalling US$2.32 billion which was invested via several segregated portfolio companies (SPCs) registered in Cayman Islands which now has been fully redeemed. The first tranche of US$1.22 billion was redeemed and repatriated last year.

"First of all," Mr Arul said, "people need to understand that the first tranche has been fully spent."

Based on the notes to the firm's latest accounts, the redemption proceeds were "substantially utilised" for debt interest payment, working capital and payment to Abu Dhabi's Aabar investments - this is estimated to be around RM830 million - in September last year to cancel an options agreement for Aabar to pick up a stake in 1MDB's energy assets.

"(Secondly), I said the remaining sum has been redeemed. I never said anything about repatriation of funds. Everyone has an agenda . . . they have conveniently misrepresented what I had said," he added, referring to pressure from Malaysia's opposition politicians for 1MDB to clarify where the money, post-redemption, is being kept.

Troubled 1MDB, whose advisory panel is chaired by Malaysian Prime Minister Najib Razak, has come under public smackdown for its hefty debts and doubtful investment decisions and more recently, signs of financial hardship with the status of the twice rolled over RM2 billion debt owed to Maybank and RHB Bank, which was due a week ago, still unclear.

1MDB is now locked in intense talks with Malaysia tycoon Ananda Krishnan for the billionaire to extend a loan to the firm to repay the debt.

Unlike his predecessors who shunned the limelight, Mr Arul has been engaging the press on an inexhaustible list of queries; but not all of them have been adequately answered. For instance, he declined to provide details on 1MDB's most immediate debt dilemma, citing confidentiality agreements. He admitted that not all is dandy at the firm. "Things are not entirely fine and there are challenges. But we have no intention of defaulting on any of our debt. I have a number of ways to meet our debt repayments. There are lots of ways to slice the cake on that."

On his perceived links to Low Taek Jho, a Penang-born millionaire who played an instrumental role in the setting up of 1MDB in its early form as Terengganu Investment Authority - Mr Low was also behind many of the early deals between 1MDB and the Middle East partners - Mr Arul categorically quashed them.

"I have never had any dealings with Jho Low. I know many top businessmen in KL . . . KL being a small place, I have bumped into people and got introduced and that's how I met Jho. It's as straightforward as that."

Nor, he said, has Mr Low, been involved in any deals involving 1MDB. "No, not based on what I've seen."

His top priority now is to "work feverishly" on the strategic review of 1MDB's entire operations "from A-Z" amid a challenging and much-changed world macro backdrop to tackle the firm's debt woes.

What would he do if he, in the process of poring over the firm's operational details, found any wrongdoing at the firm?

"I have delved extensively into 1MDB's business and its operations (since my appointment).There has been no wrongdoing at the company.

"If I were to find any trace or evidence of wrongdoing - no matter how big or small - I would immediately initiate a thorough investigation and take appropriate measures."