KUALA LUMPUR: A special task force will be set up to investigate troubled 1Malaysia Development Bhd’s (1MDB) operations and its staggering RM42 billion debt, Putrajaya announced yesterday. Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah said he would be part of the task force, which also includes Minister in the Prime Minister’s Department Datuk Seri Abdul Wahid Omar, Chief Secretary to the Government Tan Sri Dr Ali Hamsa and Treasury secretary-general Tan Sri Dr Mohd Irwan Serigar Abdullah.

“The government has set up a task force. We are looking at it entirely, including 1MDB’s debts,” Ahmad Husni said in his winding-up speech in Parliament yesterday. This is besides the earlier task force announced by the Attorney-General (A-G), comprising the Inspector-General of Police Tan Sri Khalid Abu Bakar, the Malaysian Anti-Corruption Commission, the A-G’s Chambers and the police that will look into the investment fund’s dealings after reports made against it.

Besides the government task force, Ahmad Husni also announced that the government had asked CIMB Group Holdings Bhd to be a “third party” to perform an evaluation of 1MDB, which is Prime Minister Datuk Seri Najib Razak’s brainchild, for the initial public offering (IPO) of its power assets.

“So we will also look at how much 1MDB can be valued at, how to use the land that it has and joint ventures and more, which we believe will solve 1MDB’s cash flow problems,” he said.

Ahmad Husni reiterated his previous view yesterday that 1MDB’s main issue is its cash flow problems as it is deeply in debt, noting that the company’s woes will be resolved once the IPO of its power assets takes off, expected in the second quarter of this year. “We have no problems with the principal as they are long-term debts. But the interest ... we are confident that once the IPO is done, the interest will decrease. With proceeds from the land that can be sold off and from the joint ventures, we hope to not only pay off the interest but also the debts, that is the principal,” he said.

Reuters reported in December that the IPO is aimed at helping the state investor reduce a debt burden that exceeds US$11 billion (RM40.26 billion at the current exchange rate).

Plans for the sale have been delayed several times, bankers said, due to a longer-than-expected due diligence process and debt refinancing negotiations. However, critics of the strategic investment fund have said that the IPO is not enough to solve 1MDB’s cash flow problems, as the exercise would barely raise RM18 billion against its RM42 billion debt.

“Even in the event 1MDB is able to successfully list its energy subsidiary and sell its land bank at premium prices, the financially stricken company can only raise barely RM18 billion to repay its RM42 billion debt recorded as at March 31, 2014,” said the DAP’s Tony Pua on March 13.

Ahmad Husni also announced then that 1MDB used up some RM600 million of the RM950 million standby credit provided by Putrajaya, adding that 1MDB is expected to recover from the cash flow problems that it is currently facing by the end of this year.

Prior to that, Najib had ordered the A-G to “independently verify 1MDB’s accounts”, with the findings to be passed to the bipartisan parliamentary public accounts committee. — The Malaysian Insider

This article first appeared in The Edge Financial Daily, on March 26, 2015.