1MDB Bondholders Watch If Any Seized Assets in U.S. Repatriated

Singapore Seizes $175M in 1MDB Probe
  • Unclear if any money seized will be repatriated: CreditSights
  • U.S. suit filed Wednesday amid global regulatory scrutiny

As U.S. prosecutors seek to seize $1 billion in assets they say came from funds misappropriated from 1Malaysia Development Bhd., investors in the state fund’s debt are focusing on whether any such holdings would be brought back home.

“If they can be repatriated, the money could be used to pay bondholders and the hit on the government’s balance sheet could be smaller but we have no visibility of the repatriation happening,” said Ben You Ang, a research analyst in Singapore at CreditSights Inc.

1MDB’s 5.99 percent dollar notes due 2022 fell 0.2 cents on the dollar to 107.5 cents on Wednesday, the last day for which data are available, the first decline since July 4. Its 4.4 percent dollar notes due 2023 fell 0.1 cent on the dollar to 89.2 cents on Thursday.

In a civil suit filed on Wednesday, the U.S. is seeking to seize assets that were allegedly used for the personal benefit of Malaysian public officials, their relatives and associates. Globally, regulators have been moving in to seize funds channeled through their banking systems, with Singapore saying Thursday it seized S$240 million in assets related to the 1MDB probe.

Political Risk

The firm, whose advisory board was headed by Malaysian Prime Minister Najib Razak until a few months ago, is embroiled in multiple global probes related to allegations of money laundering and embezzlement. While Najib was not named in the U.S. complaint, prosecutors refer to an anonymous top Malaysian official who controlled accounts that received hundreds of millions of dollars. The official isn’t accused of wrongdoing. 

“The U.S. findings appear to center around Najib," said Ang at CreditSights. "There could be political risk and uncertainty which may not sit well with investors.”

1MDB said in a press statement Thursday that it isn’t a party to the civil suit and doesn’t have any assets in the U.S. The firm "will fully cooperate with any foreign lawful authority, subject to international protocols governing such matters and the advice of the relevant domestic lawful authorities," it said.

“As the prime minister has always maintained, if any wrongdoing is proven, the law will be enforced without exception,” Tengku Sariffuddin, press secretary to premier Najib Razak, said in an e-mailed statement on Thursday.

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