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UPDATE 1-Malaysian billionaire set to pay 1MDB loan ahead of deadline -sources
February 12, 2015 / 9:13 AM / 3 years ago

UPDATE 1-Malaysian billionaire set to pay 1MDB loan ahead of deadline -sources

* An agreement would come ahead of a reported Feb. 18 deadline

* Banks had been keen to avoid writedowns of their loans - sources

* Ananda’s company had been guarantor of the loan

* 1MDB debt woes have weighed on ringgit, Malaysia credit outlook (Adds details)

By Yantoultra Ngui and Praveen Menon

KUALA LUMPUR, Feb 12 (Reuters) - Malaysian billionaire Ananda Krishnan is preparing to settle a $550 million loan owed by state fund 1MDB, four sources familiar with the matter said - a last-minute reprieve for the fund whose debt woes are pressuring the ringgit and the country’s sovereign credit rating.

1MDB, whose advisory board is chaired by Prime Minister Najib Razak, has amassed $11.6 billion in debt as it built up a large portfolio of power plants.

Long dogged by controversy over its debt, late financial reports and outsized profits for Goldman Sachs for handling its bond issues, 1MDB’s woes increased when it missed payments on a bridge loan that was originally due end-December. The fund was given a final deadline of Feb. 18, local media have reported.

An agreement with the nation’s second-richest man would give 1MDB some breathing space as it prepares for a $3 billion IPO of its power assets, which has been long delayed but is now scheduled for later this year.

Ananda will first pay the fund which will then settle with the banks who were keen to avoid having to write down their loans in their first-quarter earnings, sources said.

“The banks already know Ananda is payingeverything is in process,” said one of the sources.

The 2 billion ringgit loan is owed to country’s largest bank Malayan Banking Bhd, smaller lender RHB Capital Bhd and others.

The sources declined to be identified as the discussions are private. The banks did not respond to a request for comment. 1MDB declined to comment. Ananda’s company Usaha Tegas could not be reached for a comment.

While an agreement puts a state fund in the unusual position of having to reach out to a private citizen for help, Ananda has had close ties to 1MDB.

He sold his collection of power plants to the fund and his company Usaha Tegas is the guarantor for the bridge loan. Sources have also said that he is in talks with 1MDB to become a cornerstone investor in the IPO.

The intensification of 1MDB’s troubles has increasingly been cited as a factor affecting Malaysia’s longer-term economic outlook. Fears that it could default on the bridge loan have also weighed on the ringgit recently.

Fitch Ratings, which has put Malaysia’s A-minus credit rating under review with a negative outlook, said it has concerns over Malaysia’s fiscal position and contingent liabilities such as those from 1MDB.

In an attempt to resolve some of its problems, the fund appointed a new CEO in January and announced plans for a strategic review. It is also looking at selling some of its property assets, people familiar with the matter have told Reuters. ($1 = 3.6175 ringgit) (Reporting by Yantoultra Ngui and Praveen Menon, additional reporting by Saeed Azhar; Editing by Edwina Gibbs)

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