Almost at the end: The RM12.35b final step in the 1MDB rationalization

Wednesday, 30 December 2015

Almost at the end: The RM12.35b final step in the 1MDB rationalization

1MDB has just announced that it has signed to sell a 60% stake in the 486 acre Bandar Malaysia to a 60-40 consortium of Iskandar Waterfront Holdings Sdn Bhd and China Railway Construction Corporation (CRCC).

The deal was announced after an international open tender - which attracted initial interest from dozens of parties - called by 1MDB as part of its rationalization exercise.

IWH is the holding company for listed  company Iskandar Waterfront city Bhd and is 60% owned by tycoon Tan Sri Lim Kang Hoo and 40% owned by Johor Govt's Kumpulan Prasarana Rakyat Johor (KPRJ).

In Oct, 1MDB had announced that they have finally received planning approval from the govt for Bandar Malaysia, which includes a 4.05 gross development ratio and the planned HSR terminus, and two MRT stations.

40 per cent of the land is taken up by infrastructure such as transport facilities, parks, schools, to police and fire stations - leaving 60% of the land for development.

With the planning approval raising and giving certainty to the value of the land, 1MDB had initially expected a value of RM11.5b.

But after a keenly fought competitive tender, the IWH-CRCC consortium emerged the winner with the bid for 60% of Bandar Malaysia at RM7.41b - which values the project at RM12.35b.

3 1/2 years ago, 1MDB had paid an estimated RM1.6b (RM400m cash plus buying various pieces of land for MINDEF- including a 750 acre new RMAF airbase in Sendayan, a plot for a PDRM airbase in Subang and the 31 Royal Artillery Regiment base in Kajang.

On top of that, 1MDB also committed to pay RM2.1b to build and equip 8 military sites for MINDEF as compensation which brings the estimated cost of the land to RM3.7b.

But selling it for RM12.35b is a significant gain for 1MDB since it only had a RM4b valuation in their last financial statements.

This would mean that 1MDB could potential post a profit of RM8.6b out of this transaction.

After selling the 60% stake, the remaining 40% stake will be retained by 1MDB and will probably be eventually transferred back to the 1MDB's sole shareholder, the Ministry of Finance - thus Bandar Malaysia will be 76% owned by Malaysia and 24% owned by the Chinese firm.

And since the Johor state govt owns a 40% stake in IWH, this means that Bandar Malaysia will still be 54.4% owned by government.

It is anticipated that CRCC will be bringing in about RM3 billion of foreign direct investment into the country for this deal.

And if you add that to the Edra deal bought 100% by China' CGN group for RM9.83b (plus assuming debts of RM8b), that would mean a total of RM12.8b worth of foreign investments will come into the country just from 1MDB's last two deals.

This Bandar Malaysia deal is the 3rd major rationalization step for 1MDB and also fulfills Najib's promise to settle 1MDB by the end of this year - a move forced on Najib and 1MDB amidst heavy and sustained political attacks:
Asset-swap deal with IPIC signed in May 2015 - RM16bSale of Edra in Nov 2015 - RM17.3bToday's Sale of Bandar Malaysia - RM12.35bAll in all, those 3 deals means that about RM46b of value (either cash or assuming of debt) had flowed to 1MDB - which vindicates 1MDB's frequent claims that their asset is worth more than their debt.

It also proves that despite Tun Mahathir's frequent and ever-changing claims, RM42b or RM27b or billions didn't lesap - in fact there is a surplus!

After those 3 deals, 1MDB will still be left with 100% of the TRX project with remaining plots to be sold and construction well in progress, the RM300m Pulau Indah and the RM1.1b Penang land to be sold - meaning more billions to be gained too beyond the 3 milestones.

Here's a video of the TRX construction progress as at Nov 2015.

After today's signing, there would no longer be any fears that 1MDB will be a financial problem or sovereign risk for the government or for Malaysia anymore or any problems related to contingent liabilities related to 1MDB.

There should also be no more concerns that those bonds and loans given by KWAP, EPF, Tabung Haji etc would be at risk.

And hopefully, people finally realizes that no GST money was used to "bail out" 1MDB.

There's no doubt about it. Najib and 1MDB had worked hard and have delivered on their promise to "solve" 1MDB - exactly on schedule.

Here is wishing the Bandar Malaysia and TRX development all the best! Eventually, we will be left with two major developments that will help drive continued growth for Malaysia.

Here's a video giving you an idea of what TRX, the planned Islamic Finance Capital of the world, will look like when completed:

At this stage where the majority of the debt have been settled, 1MDB will still have:
1) 100% of TRX that will continue to be developed and bring economic gains and spin-offs to Malaysia
2) 40% of 1MDB with another effective interest of about 18% by Johor State Govt - that will continue to be developed and bring economic gains and spin-offs to Malaysia
3) delivered 8 military facilities to MINDEF
4) Pulau Indah and Penang land yet to be sold off/developed

All the above for initial RM1 million capital injection and two land deals.

It was never 1MDB's initial intent to have gone on to this rationalization plan but the continued political attacks on 1MDB, which prevented 1MDB from receiving a much-needed capital injection and unable to tap capital markets further, have forced the govt hands to do this.

For me and the Malaysians who wishes to see our economy not be affected by this in any way, we rather the debt be settled.

But in the end, what is important is the debt is resolved but many people will still be unhappy with 1MDB - which begs the question of what do they want?

That 1MDB's RM42 debt be resolved or for 1MDB's RM42b debt not to be resolved?

You can never please them.

In fact, many people would not like the RM42b debt to be settled and for it to remain. They will reject all sorts of moves to settle the debt and will give whatever reasons why this debt should remain unsettled - mainly because they do not want to be proven wrong or continue to use this RM42b debt as an excuse to slam the government.

Posted by Lim Sian See at 19:05 

Tuesday, 29 December 2015

1MDB: LSS asks and WSJ's Tom Wright answers

Today, Tom Wright from the Wall Street Journal hosted an online Questions and Answers session on FaceBook at 5pm Malaysian time.

Tom Wright is the chief author of the frequent 1MDB articles featured in the Wall Street Journal including the RM2.6b "expose".

I posted 10 questions for him and he tried to answer as many as he could.

Could you shed some light into these questions that I long had:

On the PetroSaudi-1MDB JV
1) Why would the owner of PetroSaudi, Prince Turki the 7th son of their absolute monarch and Governor of Riyadh, their largest province and city, want to collaborate with a Chinese Malaysian to steal Malaysian money? Doesn't the Kingdom of Saudi Arabia with sky-high oil prices then have enough money that it need to steal a mere USD1.83b? 

2) Is it possible that the PetroSaudi-1MDB JV is a Government-to-Government initiative with the backing of the King of Saudi and the PM of Malaysia? Both leaders had met quite frequently during the exact period where 1MDB-PetroSaudi JV was created. 

3) What is your evidence that Good Star is owned by Jho Low? 

4) Is it possible that Good Star was an investment vehicle still fully owned by PetroSaudi but they had engaged Jho Low or his team to manage any funds in there? As I remember from the Sarawak Report expose, there was an agreement for such fund management services. 

This is also possible as Jho Low had made his name prior to the Terengganu Investment Authority (TIA), the predecessor to 1MDB was even founded or Najib became Prime Minister 

He had used Arab money related to various middle-east royal families to buy over three publicly listed companies in 2007-2008 which is even before 1MDB existed. 

On Abu Dhabi's IPIC

5)  Why is it that IPIC had never made any public statement confirming that they have lost billions as alleged by yourself? 

6) Since IPIC bonds are listed on the London Stock Exchange, losing up to USD2.4 billion as alleged by you, would be a cause for at least a query by the London Stock Exchange to IPIC but there was none. Why is that? 

7) If Billions are missing, would would IPIC continue to pay USD1 billion in cash to 1MDB in June and still take over their USD3.5 billion of bonds and even paid the bond interest for them in Oct and Nov recently? 

8) Why is it that after four or five years being existed by the biggest and 2nd biggest audit company in the world, KPMG and Deloitte, none of them could find any evidence of missing billions over so many years? 

9) What is the global implications if both KPMG and Deloitte was found to be negligent and could not detect your alleged fraud of this scale of billions of dollars missing? I remember Enron was not even this scale and it was just one of the big audit companies which closed down causing havoc to the worldwide finance industry during that time. 

10) Since you mentioned multiple times in your article today that there does not seem to be any Malaysian laws broken, what is your personal motivation to continue pursuing this 1MDB story in a passion that no one else has? Are you in communications with Clare Brown as it seems your articles are coordinated with Sarawak Report. For example, Sarawak Report came out with their own report on the USD850m that you allege to be missing within mere minutes of your WSJ article being published. 

Thanking you in advance for your answers.

Tom replied and the following are his answers.

Well, that's it. Tom sort-of answered 5 out of the 10 questions and skipped the rest. He then thanked me for the very thoughtful questions.

Personally I am not happy with his answers and had wanted more details and more convincing answers.

I thanked him for the answers and asked him to feel free to add to his questions when he has the time later.

To be fair, I can't be hogging all his time as he needs to answer the rest of the world on this 1MDB issue.

Let's see if he will come back and answer more. I will update this blog if he does.

I did notice that the likes of Muhyiddin Yassin, Tun Mahathir, Tony Pua, Rafizi Ramli and the rest who wanted to so desperately seek answers about 1MDB were not there to take this opportunity to ask though.

Perhaps they are on their holidays.

There was an interesting question from The Malay Mail Online.

So, let it be on record that so far no one has threatened to harm the WSJ's journalist.

Posted by Lim Sian See at 02:06  

Tuesday, 22 December 2015

Dear CM, would you like to borrow my pen?

Would you believe it if a Chief Minister very angrily says he wants to sue you because you slandered him but then he and/or his lawyers forget to sign on their own court papers? This is a true story. Read on.

In the middle of the Selangor MB crisis, on 6th August 2014 the PAS Member of Parliament for Temerloh, Nasrudin Hassan made these allegations against Penang Chief Minister YAB Lim Guan Eng regarding the Penang Tunnel Project:

The Penang Tunnel was awarded without open tender. The Penang Tunnel did not have sufficient public consultations. The Penang Tunnel at RM4,63 billion (for 6.5km) is overpriced.The Penang State Govt keeps running budget deficits.Lim Guan Eng got very angry and issued a bi-lingual press statement on the very next day denying all the above and gave Nasrudin Hassan 24 hours to apologize. He also stated in his denial that the tunnel only cost RM3.6 billion and not RM4.63 billion.

You can see Lim Guan Eng's press conference with the 24 hour ultimatum to Nasrudin here:

The next day, YB Nasrudin said he refuses to apologize and made further clarification on his allegations including:

The tunnel is still overpriced and worse, the figure of RM3.6 billion (for the tunnel portion out of the total RM6.3 billion project cost) given by Lim Guan Eng would have still mean a total cost of RM553 million per km to build while the 20.8km of above ground roads connected to the tunnel would cost RM2.7 billion or RM130 million per km - a staggeringly high figure.That the award of the Penang Tunnel project is still not an open tender as Lim Guan Eng had signed a MOU on the Tunnel with Beijing Urban Construction Group Co. Ltd (BUCG) - one of the consortium member of the winning party on 28 April 2011 - a full 6 months before the project pre-qualification on 14 Nov 2011 - and a full two years before the project was awarded in 2013.The Penang State Govt would have been in budget deficits if not for the revenue from the yearly sales of state land that has increased by 303% from the past few years.For avoidance of doubt, the Penang state govt is paying RM6.3 billion worth of land to the private company to build the Penang Tunnel and accompanying roads. On top of paying RM6.3 billion, the Penang state govt will also give a 30 years toll concession (despite this being against Pakatan manifesto) to the private company to collect tolls.

When asked the reason why the 30 years toll concession was given on top of paying the full cost of the tunnel, Lim Guan Eng had given the official excuse that he doesn't want Penang bridge operators to use him, - which of course makes no sense at all.

This made Lim Guan Eng even more angry and he announced the next day on 9th Aug 2014 that he has already got his lawyers to sue Nasrudin Hassan.

Listen to LGE as he holds yet another press conference - this time saying he has no choice but to sue Nasrudin.

This time, Lim Guan Eng did not lie and his lawyers did indeed continue to sue Nasrudin Hassan over this RM6.3 billion overpriced no open tender allegation and a defamation suit was issued to Nasrudin Hassan.

However.... horrors of horrors !!!

A little over a month later on Sept 30th 2014, we learned that the high court has thrown out this defamation case against Nasrudin by Lim Guan Eng and fined Lim Guan Eng RM500 for wasting the court's time!!

This was reported by PAS newspaper Harakah and Free Malaysia Today saying that the reason was that Lim Guan Eng and his lawyers "forgot" to sign on their own summons paper which they issued against Nasrudin!

On 2nd Oct 2014, the Malay edition of MalaysiaKini also reported this and quoted Lim Guan Eng's lawyer as saying it was a genuine mistake that they forgot to sign:

As a side-note, it is important to point out that this particularly fishy and highly embarassing piece of news of "the Chief Minister LGE and his lawyers forgetting to sign on their own summons" which they themselves issued was never reported by the English version of MalaysiaKini or Malaysian Insider nor in any official Lim Guan Eng or DAP statements or media.

Exactly like how MalaysiaKini and Malaysian Insider "forgot to report" on the biggest ever record lawsuit award in Malaysia where the PKR ADUN for Api-Api and PKR Sabah Deputy Chairperson Christina Liew was ordered by the High Court to pay RM557 million for colluding with her staff to cheat 819 poor landowners out of their land.

Okay.. back to the LGE "forgot to sign" lawsuit...

LGE's lawyer at that time said that "as soon as we receive back the documents from the court, we will re-issue the defamation suit to Nasrudin Hassan again".

That was on 2nd Oct 2014.

Today is 23rd Dec 2015 - and more than a year later, there are no media reports about this defamation law-suit ever being re-issued and there is no trace of this lawsuit in the courts systems.

And I thought that DAP and PAS hated each other now. Suing the PAS MP for defamation and humiliating him would help LGE and DAP prove what "liars" PAS leaders are - but strangely LGE didn't take this opportunity.

Despite multiple press conferences and press statements and angry threats initially saying he will sue, when it comes down to actually suing LGE went all quiet.

Why is this? Nothing for over one and half years?

This leads me to ask Lim Guan Eng and his lawyers this following question:

Now, using the same logic of opposition supporters and leaders, does Lim Guan Eng not suing mean that what Nasrudin accused LGE of is true?

That the allegations by PAS Nasrudin Hassan are true? 

"RM6.3 billion Penang Tunnel project is way overpriced, that the project was awarded without open tender and that Penang State Government would be running annual deficits without selling state land?"

---
Now, many people have alleged PM Najib Razak of not suing over WSJ's July 2015 allegation that Najib supposedly stole RM2.6 billion from 1MDB is proof that Najib is guilty.

The latest update however is that last month, Najib's lawyers are advising PM to saman WSJ in Malaysia.

Najib's lawyers to advise him to sue WSJ in Malaysia, not US

There is nothing wrong with this as each and every one of Singapore govt's four defamation cases against Wall Street Journal which they won were also all filed in Singapore: THIS IS HOW SINGAPORE DOES IT.  https://www.facebook.com/lim.siansee/posts/1691245134427607:1

It also took months form the date of the original article before Singapore officially filed their charge.

But in the meantime, over the past two years, Najib has sued the following persons for defamation:

Najib sued DAP's Tony Pua over Tony Pua's 1MDB allegations. Instead of wanting to grill Najib in court over 1MDB to "find out the truth about 1MDB", Tony Pua wants to strike off (cancel) the lawsuit on technical grounds. The case is still going on.Sued MalaysiaKini for alleging that Najib bribed ADUNs in Terengganu - to which MalaysiaKini has offered to say it regretted its actions but Najib wants a full apology. Sued Ling Liong Sik for saying Najib took public money. Sued DAP's Nga Kor Ming for slandering that Rosmah is in control of cabinet. The Govt charged former Perak Menteri Besar Nizar Jamaluddin from PAS (now Amanah) for criminal defamation. Nizar has now given a full apology to Najib and the case is settled.

Najib also sued PKR's Secretary General Rafizi Ramli for defamation for publicly saying in ceramahs that Najib steals money from public to buy diamond rings for Rosmah.

After being sued, Rafizi's official excuse in the court proceedings was an incredible "I was just joking".

Thus, Najib does indeed have a very good track record in following-up with his threats to sue others for defamation.

I believe it is also a matter of time before their lawyers file suit against Wall Street Journal's article which suggested that RM2.6 billion of money from 1MDB went into Najib's personal account (the MACC has already said the money was not from 1MDB).

The case would probably be filed in Malaysia - just like how Singapore's leaders filed and won defamation suits against WSJ in their own country and remember that Singapore leaders also took months or up to a year before officially filing suit agaisnt WSJ too as suing a foreign news agency from the USA is easier said than done.

But at least Najib and his lawyers did not give lame excuse as "forgetting to sign" on their own law-suits.

I do find it amazing thought that people are more concerned about a lawsuit by Najib over RM2.6 billion but do not seem concerned that a RM6.3 billion overpriced project no open tender award allegation law-suit did not proceed for over 1 1/2 years based on a "forgot to sign own saman" excuse.

Malaysians are strange but I am confident that not many of my fellow Malaysians are so foolish to believe a "forgot to sign on own court summons paper" excuse.

Or it could be the opposition-friendly media did not play up this issue and kept it well-hidden in order to continue misleading and using the opposition supporters.

Posted by Lim Sian See at 21:00