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[KUALA LUMPUR] 1Malaysia Development Bhd, the state-backed fund whose debt trouble threatens to bring down the nation's credit rating, will meet offshore bondholders on March 27, according to people familiar with the matter.
Goldman Sachs Group invited the investors to meet company officials in Singapore, said the people, who asked not to be identified because the details are private.
Fitch Ratings is considering a downgrade of Malaysia's credit rating, partly due to the lack of transparency surrounding the liabilities of its state-backed fund. 1MDB, whose advisory board is headed by Prime Minister Najib Razak, has been forced to dismantle its assets amid surging debts.
"There's a lot of interest in 1MDB right now," said Khoon Goh, the Singapore-based foreign exchange strategist at Australia & New Zealand Banking Group. "Any information from them will be very welcome not only by bond investors but by everyone who follows Malaysia." Edward Naylor, a Hong Kong-based spokesman for Goldman Sachs, declined to comment. A 1MDB official couldn't immediately be reached for comment by phone or e-mail today.
1MDB, set up by the government five years ago to build infrastructure with borrowed money, flirted with default earlier this year after delaying payment on a 2 billion ringgit (US$536 million) loan by about three months.
The yield premium of its bonds due in 2023 over US Treasuries has risen 229.2 basis points this year to 483.55 basis points, according to data compiled by Bloomberg.
The issues with the state-backed fund are weighing on the credit-worthiness of Malaysia. Five-year contracts insuring the nation's debt cost 136 basis points, almost double the average of 68 for the remaining four countries currently rated A- by Fitch, according to credit-default swap data from CMA.
1MDB is "a quasi sovereign name but trades very wide," said Annisa Lee, credit analyst at Nomura International HK. "Given the weak financial standing of the company as reflected from late repayment of bank loans, investors would wonder if government will grant assistance to the entity."