Malaysia’s US$1.7 Billion Property Deal To Cut 1MDB Debt Falls Through
KUALA LUMPUR: A US$1.7 billion property deal that was expected to ease the debt burden of Malaysian state fund 1Malaysia Development Berhad (1MDB) fell through on Wednesday (May 3), complicating Prime Minister Najib Razak’s efforts to move on from a financial scandal surrounding the fund.
TRX City Sdn Berhad, a former 1MDB division now owned by the Malaysian finance ministry, said a deal to sell 60 per cent of Bandar Malaysia – a major real estate development project in Kuala Lumpur – lapsed because the buyers “failed to meet the payment obligations.”
In December 2015, Iskandar Waterfront Holdings, owned by Malaysian tycoon Lim Kang Hoo and China Railway Engineering Corp had said they would buy a 60 per cent stake in Bandar Malaysia from 1MDB for 7.41 billion ringgit (US$1.72 billion).
Iskandar Waterfront and CREC could not be immediately reached for comment.
Prime Minister Najib had said at the time that this sale, plus other deals, would mean 1MDB’s major challenges were now behind it.
1MDB had racked up more than US$11 billion in debt before beginning a restructuring program in 2015. The fund is also the subject of money-laundering investigations in at least six countries.
1MDB has denied any wrongdoing.
“TRX City will immediately be inviting expressions of interest for the role of master developer of Bandar Malaysia, with full ownership being preserved by the Ministry of Finance,” the company said in a statement.
TRX City was originally owned by 1MDB but the finance ministry took control last year as part of its efforts to clean up the financial fallout from the scandal. TRX City said the finance ministry would remain its sole shareholder.
When the Bandar Malaysia deal was first announced, 1MDB said Iskandar Waterfront would hold 60 per cent of the venture buying the 1MDB stake, while China Railway Engineering would hold the rest.
The Bandar Malaysia development will include a hub for a digital free trade zone and a terminal for the high-speed rail connecting Kuala Lumpur and Singapore.
Last week, 1MDB agreed to pay US$1.2 billion to Abu Dhabi’s International Petroleum Investment Co (IPIC) to resolve a debt dispute, a move giving a boost to Najib ahead of elections that could be called later this year.