Abu Dhabi Sovereign Fund Extends Payment Deadline for Malaysia's 1MDB

By Saurabh Chaturvedi Features Dow Jones Newswires

An Abu Dhabi sovereign-wealth fund on Tuesday said it has extended the deadline for a Malaysian state-investment fund to make a payment of about $600 million, giving its former business partner until the end of August to honor its obligations.

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The money is the first installment of a $1.2 billion sum that 1Malaysia Development Bhd., known as 1MDB, agreed to pay Abu Dhabi's International Petroleum Investment Co. to compensate it for an emergency loan and other financial support extended after the Malaysian fund was unable to service its debt obligations.

As a condition for extending the July 31 deadline, IPIC said it will require the Malaysian Finance Ministry and 1MDB to pay at least $310 million by Aug. 12. 1MDB will also have to pay default interest on the delayed payment, IPIC said in a statement filed to the London Stock Exchange.

Malaysia's Finance Ministry and 1MDB didn't immediately respond to requests for comment on Tuesday.

1MDB last week said it had been due to make the payment to IPIC by July 31, using proceeds from the sale of units it owns in offshore investment funds, but failed to do so because of regulatory hurdles in getting the money. The Malaysian fund said it had "written to IPIC to inform them of our commitment to meet the obligations."

IPIC at the time confirmed it hadn't received the payment and said 1MDB and Malaysia's Finance Ministry had five business days to remedy the situation before they "become subject to additional obligations."

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1MDB was launched in 2009 to spur economic development in Malaysia but accumulated $13 billion in debt. It began struggling in 2015 to make payments on the debt and later was found to be missing billions of dollars. Investigations in search of the money sprang up in the U.S., Singapore and other countries. U.S. investigators allege that at least $4.5 billion was stolen from 1MDB.

1MDB has denied wrongdoing and promised to cooperate with investigators.

IPIC and 1MDB signed a settlement agreement in April. The $600 million payment owed to IPIC was the first to come due since the U.S. Justice Department in June and Singapore's public prosecutor in July alleged in court filings that units owned by 1MDB in an offshore investment fund were actually almost worthless. 1MDB had maintained they were worth about $940 million. The fund hasn't commented on the allegations.

1MDB has said it would pay IPIC back from the proceeds of the sale of those fund units through a "monetization." It didn't give details at the time of the settlement agreement.

The mystery surrounding the units, owned by a 1MDB subsidiary called Brazen Sky, has plagued 1MDB for years. The company went through three auditors trying to find one to value it without seeing the underlying assets, according to 1MDB board minutes.

The delay in payment threatens to reopen a dispute between IPIC and 1MDB over who should foot the bill for money allegedly stolen from the Malaysian fund.

Bradley Hope contributed to this article.

Write to Saurabh Chaturvedi at Saurabh.Chaturvedi@wsj.com

(END) Dow Jones Newswires

August 08, 2017 11:36 ET (15:36 GMT)