IPIC pays skipped coupon on 1Malaysia’s 5¾% notes, seeks compensation

By Susanna Moon

Chicago, April 29 – International Petroleum Investment Co. PJSC said it paid on Friday the missed interest due April 18 on the $1.75 billion of 5¾% notes due 2020 issued by 1MDB Energy (Langat) Ltd. and payable by 1Malaysia Development Bhd.

IPIC made the $50,312,500 interest payment from existing liquidity and under its obligations to guarantee the notes, according to a company press release.

The company said it will make a written demand for its indemnity for repayment of the interest payment from Minister of Finance, Inc., Malaysia and 1MDB.

As announced April 26, 1Malaysia said it failed to make the coupon payment on the notes and that the missed coupon triggered a cross-default on the RM 5 billion sukuk due 2039 issued by 1Malaysia Development and guaranteed by the government of Malaysia and the RM 2.4 billion sukuk due between 2021 and 2024 issued by Bandar Malaysia Sdn. Bhd.

There is no cross-default, however, on the RM 800 million loan from the Social Security Organisation, the $1.75 billion 5.99% notes issued by 1MDB Energy Ltd. and the $3 billion of 4.4% notes issued by 1MDB Global Investments Ltd., the company previously said.

1Malaysia previously said that it did not make the interest payment on the 5¾% notes because International Petroleum Investment did not make the $50.3 million interest payment required under a term sheet executed on May 28, 2015. Under the term sheet, International Petroleum Investment assumed the obligations to pay interest and principal on the notes, according to 1Malaysia.

Despite the dispute, 1Malaysia said it will meet all its other financial obligations and has “ample liquidity to do so.”

1Malaysia previously said it “has been surprised by IPIC’s comments and unequivocally asserts that it has attempted to meet all its obligations to IPIC, whereas IPIC has publicly denied receipt or knowledge of various financial transactions and/or guarantees entered into between the parties. Accordingly, whilst 1MDB has the funds to have made the interest payment, it is 1MDB’s position, as a matter of principle, that it was IPIC’s obligation to do so. Until IPIC accepts that all obligations have been met, 1MDB is obliged to withhold payments and will seek legal recourse and resolution.”

International Petroleum Investment contended on April 18 that it was 1Malaysia and the Malaysian Ministry of Finance that was in default.

In a statement it said: “IPIC has performed all of its obligations to date under the binding term sheet. 1MDB and MOF have failed to perform certain payment and other obligations owed by them to the IPIC group pursuant to the terms of the binding term sheet, including the obligation to pay to IPIC U.S.$1,102,725,000 plus interest accruing under the terms of the binding term sheet.”

As a result, International Petroleum Investment said it considered its obligations under the term sheet to have terminated.

On Monday, International Petroleum Investment added that it will make the $50,312,500 interest payment to holders but only after 1Malaysia defaulted. A default occurred on Monday as a result of five days passing from the April 18 date on which the coupon was due.

The payment will be made under International Petroleum Investment’s guarantee obligation for the notes, not the term sheet, according to an announcement.

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