An Abu Dhabi sovereign fund said on Monday Malaysia's troubled state fund 1Malaysia Development Berhad (1MDB) was in default of its obligations on $1.1 billion in debt and interest.
The International Petroleum Investment Company (IPIC) said in a filing to the London stock exchange, where it is listed, that it was now considering all its options to remedy the default. That included referring the matter to the appropriate dispute resolution forum, the IPIC statement said.
The Abu Dhabi fund said it was terminating last June's agreement, under which it agreed to provide $1 billion in cash as well as assume payments on $3.5 billion of 1MDB debt. It also forgave an undisclosed amount of debt that 1MDB owed to IPIC, in exchange for assets which have not been named.
The Abu Dhabi fund said 1MDB and Malaysia's finance ministry - which owns 1MDB - are in default on the terms of this agreement.
1MDB said in response that Abu Dhabi had agreed to assume its interest payments on a $1.75 billion bond, but one such payment, due on Monday, had not been paid because of the dispute between the two.
"1MDB wishes to make clear that it and its group entities will meet all of their other obligations under any other financing arrangements and have ample liquidity to do so," it said in a statement.
The Malaysian fund did not specify whether it would make the interest payment that was due on Monday.
In an earlier statement, the 1MDB fund said it has repaid all of its bank debt and short term obligations, and has a cash surplus of approximately 2.3 billion ringgit ($585.2 million).
Over the past four weeks, 1MDB has made debt principal repayments of approximately 7.25 billion ringgit, it said.
Monday's announcements throw 1MDB's efforts to rationalise its debt into doubt, said Christian de Guzman, a credit analyst at Moody's Investors Service in Singapore, which rates the $1.75 billion 1MDB-linked energy bonds.
"We're still trying to figure out what it means for IPIC because IPIC has guaranteed these bonds and as far as we understand these (guarantees) were irrevocable."
Source: Times of Oman=