Moody's says 1MDB default raises contingent liability risks to sovereign

MOODY'S on Wednesday said the 1Malaysia Development Berhad (1MDB) default raises contingent liability risks - a credit negative for the sovereign.

The issuer's comment comes after news that Malaysia's state-owned 1MDB did not service a coupon payment on a bond issued by a subsidiary.

Said Moody's: "The default increases the probability that contingent liabilities, particularly through cross-defaults and an associated indemnity, will crystallize on Malaysia's government balance sheet, a credit negative for the sovereign."

It estimates the total size of these contingent liabilities - those associated with 1MDB's recent default - to be around 2.5 per cent of GDP.