Arul Kanda Kandasamy held a press conference on Saturday to explain what was happening in 1MDB and what they planned to do to resolve what he called the companyâ€™s cash flow problems (see the news item below).
The attack on 1MDB started on 12th December last year when Tun Dr Mahathir Mohamad asked Khairuddin Abu Hassan to lodge a police report to say that RM42 billion of the companyâ€™s money had disappeared into thin air. Basically, this allegation that Prime Minister Najib Tun Razak had stolen RM42 billion was supposed to be used as a leverage to force him to resign from office.
In January this year, Arul Kanda was appointed the new head of 1MDB and his main focus was to solve 1MDBâ€™s cash flow problems and embark on a debt reduction exercise.
In June this year, 1MDB submitted its plans for a rationalisation and debt reduction exercise to the Cabinet and after being briefed on the affairs of the company and what was going to be done to solve the companyâ€™s financial predicament the Cabinet approved the plan.
In July this year, the Special Task Force comprising Bank Negara Malaysia (BNM), the Attorney Generalâ€™s Chambers (AGC), the Royal Malaysian Police (PDRM) and the Malaysian Anti-Corruption Commission (MACC) raided Deloitteâ€™s office and seized 1MDBâ€™s accounts and documents, which basically threw a spanner in the works and brought the rationalisation and debt reduction exercise to a grinding halt.
This was how Arul Kanda explained it:
â€œA failed listing exercise for 1Malaysia Development Bhdâ€™s (1MDB) energy assets last year is the main contributor to the firmâ€™s present financial difficulties.
1MDB had two targeted dates in which to list the assets, which are now held under its power unit Edra Global Energy Bhd.
The first was in November 2013 and another date was set for November last year.
In both circumstances, for various reasons including internal and external factors, the initial public offering (IPO) did not happen.
When the IPO failed to materialise, a mismatch arose between the interest charges that needed to be repaid in the short term as well as principal payments, Arul explained.
That is my answer as to why 1MDB is facing the difficulty and challenges that we are going through today.â€
Arul Kanda went on the explain that without reducing its current debt load of RM42 billion, the cost of servicing the interest on the debt amounts to RM2.4 billion per annum.
So that was what 1MDB was focusing on. However, after obtaining the Cabinetâ€™s approval in June, and just before the exercise could be completed, the following month in July the Special Task Force confiscated 1MDBâ€™s accounts and documents and frustrated the move to solve the companyâ€™s cash flow problems through the IPO.
Arul Kanda does not deny 1MDBâ€™s problems. In fact, he told the Cabinet the extent of the problems, as he did last Saturday during the press conference. 1MDB even has a plan on how to solve these problems, which the Cabinet knows about and which it approved. But 1MDB was stopped from doing it due to the Special Task Force raid and the confiscation of all its accounts and documents.
In short, the Special Task Force prevented the IPO from happening and in that same move prevented 1MDB from getting out of debt, or at least from reducing its debts.
Why did they raid Deloitteâ€™s office and why did they inform the media and the opposition portals about an impending raid prior to the raid? Was this part of a negative publicity exercise against 1MDB? And surely they would know that such a move would torpedo the IPO and sabotage 1MDBâ€™s efforts at solving its cash flow problems.
The completion of the IPO would have given 1MDB the much-needed cash that would not only have helped reduce its debts but would also have solved its cash flows problems. And that appears to be what they do not want to see happen. They want 1MDB to continue with its present predicament because if it turns around then this issue can no longer be used against Najib to force his resignation.-By Raja Petra Kamarudin/Malaysia Today