KUALA LUMPUR (April 28): The Edge Weekly, in a major expose on 1MDB today, has unearthed many questionable deals the state investment fund had been involved in and said 1MDB should bring home RM18.1 billion parked overseas.

The weekly began to probe the past deals of 1Malaysia Development Bhd (1MDB) after the controversial state fund released its later-than-expected FY2013 ended March 31 accounts and annual report.

The Edge Weekly, in its three-page cover story, said 1MDB’s accounts have raised concerns about its billions, raised from issuing government-guaranteed bonds, managed by unnamed fund managers overseas.

The 1MDB accounts show that US$2.318 billion (RM7.88 billion) is now parked in Cayman Islands under a segregated portfolio company (SPC) few understand. Another US$3 billion (RM10.2 billion) has been placed with an unnamed overseas financial institution and half of this (US$1.58 billion or RM5.37 billion) is in various types of investment portfolios.

The weekly noted that IMDB “is sending money out even as it continues to issue more debts and borrow more to finance its various acquisitions”. As at March 31, 2013, 1MDB had total borrowings of RM36 billion. Its annual debt service is RM1.6 billion.

“The pattern of 1MDB’s borrowings vis-à-vis its acquisitions shows that it has actually been borrowing more than necessary,” commented Ho Kay Tat, CEO of the Edge Group, in his column My Say.

Using graphics to trail 1MDB’s money and its use, The Edge Weekly shows that the first RM5 billion raised by 1MDB in 2009 had been used to fund the activities of PetroSaudi International Ltd.

Even as 1MDB unwound its partnership with PetroSaudi, the latter never had to pay 1MDB cash upfront but always through interest bearing deferred payment schemes.

And when the partnership finally ended in September 2012, the money (US$2.318 billion by then) was not sent back home (although 1MDB was in need of funds and was issuing several rounds of debt paper). Instead it was parked under a SPC in Cayman Islands.

“This question must be asked of 1MDB: Why over-borrow only to send the excess cash out of the country? Besides, the 5.78% return it received from the Cayman SPC was just enough to pay the cost of funds of 5.75%.

As it stands, the only people who would have benefitted are the fund managers and the financial institutions, which will be paid for managing all the billions 1MDB has placed with them.

Given that it is taxpayers’ money it is handling, it is time 1MDB is more transparent and accountable,” commented Ho.

Back home, 1MDB also made three “strange” land-related transactions worth RM1.38 billion in Penang, revealed the Edge Weekly.

These deals included one sealed with Farlim Group (M) Bhd controlled by Chinese community leader Tan Sri Lim Gaik Tong. In this deal, 1MDB “entered into an agreement to acquire additional undivided shares in several plots of land” from Farlim for RM113 million.

The other two deals, totalling a whopping RM1.268 billion, only came to light in 1MDB’s accounts for its financial year 2012 ended March 31 that were released last week after a one-year delay.

On 1MDB’s financials, the Edge Weekly said without a revaluation gain of RM2.7 billion, 1MDB would have been in the red for its financial year ended March 2013, and its bleeding would have come from accumulation of RM42 billion in liabilities, including RM36 billion in borrowings, after just five years of existence.

In fact, 1MDB’s after-tax profit of RM778.2 million (on revenue of RM2.6 billion) for FY2013 was the result of a land revaluation gain of RM2.7 billion, without which the company would have bled RM1.8 billion.

For more details on the major expose and unnerving tales on the management of funds by 1MDB, read The Edge Weekly (April 28 - May 4 issue). – theedgemalaysia.com