Now 1MDB says RM7.41 billion inclusive of relocation costs and liabilities

Now 1MDB says RM7.41 billion inclusive of relocation costs and liabilities

PETALING JAYA: 1Malaysia Development Bhd (1MDB) yesterday acknowledged that the RM7.41 billion price tag for a 60% stake in Bandar Malaysia takes into account the RM2.7 billion relocation costs for the Royal Malaysian Air Force base and a RM2.4 billion Islamic bond.

In a press conference last week, its president and CEO Arul Kanda Kandasamy had said the sukuk and costs would be borne by the consortiums of the winning bid, on top of the RM7.4 billion for the 60% stake.

China Railway Group Ltd’s wholly-owned subsidiary China Railway Engineering Corp (M) Sdn Bhd and Johor-based Iskandar Waterfront Holdings Sdn Bhd have a 40% and 60% stake in the consortium, respectively.

This explains why China Railway Group has indicated a lower purchase consideration for the consortium’s 60% stake in Bandar Malaysia.

In a detailed statement released yesterday, 1MDB said the deal has been structured in such a way that Bandar Malaysia would be parked under a special purpose vehicle that 1MDB or the Ministry of Finance (40%) and the consortiums (60%) would have interests in.

1MDB said whether the remainder of the relocation costs and Islamic bond will be transferred to the new special purpose vehicle, which is 40%-owned by 1MDB and Ministry of Finance and 60%-owned by the consortium, the purchase consideration of RM7.41 billion does not change.

“The only difference is whether 1MDB receives the amount in full, then pays for the costs or whether the consortium pays for its share of the costs and remits the balance of RM5.3 billion to 1MDB,” it explained.

The confusion over the price tag of Bandar Malaysia started when the Chinese firm said in a filing with the Hong Kong Stock Exchange that the consortium will only pay RM5.279 billion for the stake, a RM2.13 billion shortfall compared with the RM7.41 billion announced.

Calculations show that the deductions of RM1.9 billion relocation costs (remaining construction costs and variation orders) and RM1.63 billion Islamic bond cost as at December 31, 2015 from the RM12.35 billion valuation for the entire Bandar Malaysia work out to be RM8.8 billion, of which 60% of it equals to RM5.3 billion.

A property valuer who declined to be quoted said there is no right or wrong for 1MDB to include liabilities or other related costs in the land valuation as the consortium is buying into a stake in a company.

“It depends how you define the terms and whether you are on the buyer or seller side,” he noted.

On another note, 1MDB stressed that the sale of equity in Bandar Malaysia is not in any way linked to the eventual award of the high speed rail project nor has 1MDB or the Malaysian government made any representations or agreements to that effect.

“1MDB and the consortium both confirm that HSR is an entirely separate project, whose award will ultimately be determined jointly by the governments of Malaysia and Singapore, per a separate process, that is and will not be linked or be contingent on, in any way, to the sale of 1MDB equity in the Bandar Malaysia project,” it said.

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