1MDB Makes Final Payment to Abu Dhabi Sovereign-Wealth Fund -- Update

By Yantoultra NguiFeaturesDow Jones Newswires

KUALA LUMPUR, Malaysia--Malaysian state-investment fund 1Malaysia Development Bhd., or 1MDB, said it has paid all that is required to be paid to Abu Dhabi's International Petroleum Investment Co. by the end of December.

The payment spares Malaysian Prime Minister Najib Razak's administration some embarrassment ahead of a general election due to be held within the next year. It might also alleviate some concerns about Malaysian state securities for foreign investors, who own a significant share of government bonds in the Southeast Asian nation.

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The payment is the last by 1MDB to compensate its former business partner for an emergency loan and other financial support extended after the Malaysian fund--which is under investigation in half a dozen countries--was unable to service its debt obligations.

The precise amount of the payment wasn't disclosed either by 1MDB or IPIC, which stated earlier Wednesday in a filing to the London Stock Exchange that it had been made.

IPIC, in the brief announcement, said the payment is under the settlement with Malaysia's Finance Ministry and 1MDB and a consent award made on May 9, 2017.

1MDB, which is wholly owned by the Malaysian Finance Ministry, said in a separate statement later that all funds were "paid from proceeds of the ongoing rationalization program," referring to an effort to reduce debt by selling assets.

With the completion of the payment, both sides are expected to move on to discuss a further $3.5 billion of disputed payments.

The market had been watching closely to see if 1MDB would be able to meet its payment deadline.

1MDB missed the first installment amounting to some $600 million due at the end of July, and was given an extension until August. It eventually paid, though not before rattling local debt markets.

Foreign ownership of Malaysian government debt securities fell by 2.3 billion ringgit, or around $564 million, in July--the month that 1MDB missed the payment--compared with a net outflow of 330 million ringgit in June, according to data from Malaysia's central bank.

The net outflow narrowed to 745 million ringgit in August and turned into a net inflow of 9.3 billion in September.

1MDB was launched by Mr. Najib in 2009 to spur economic development but accumulated $13 billion in debt. It began struggling in 2015 to make payments on its debts and later was found to be missing billions of dollars. Investigations are under way in the U.S., Singapore and other countries. U.S. investigators allege that at least $4.5 billion was stolen.

1MDB has denied any wrongdoing on its part, and has pledged to cooperate with any lawful investigations. Mr. Najib has also denied wrongdoing and was cleared of any wrongdoing by the Malaysian attorney general.

Last week, Switzerland's financial regulator, the Swiss Financial Market Supervisory Authority, or Finma, announced that it will review the controls of JPMorgan Chase & Co.'s Swiss unit after finding that it had "seriously breached" anti-money-laundering regulations related to its dealings with 1MDB.

Write to Yantoultra Ngui at yantoultra.ngui@wsj.com

(END) Dow Jones Newswires

December 27, 2017 07:11 ET (12:11 GMT)