Thursday, July 2, 2015

Just Units: Pre PAC Questions for Arul Kanda Kandasamy

Salam Ramadan to all my readers

Today is the 2nd of July 2015, exactly 2,248 days since I first stood up to oppose the setting up of Terengganu Investment Authority (here), it was merepek then to me......sekarang lagi la merepek in case your're wondering what I think of 1MDB.

I seldom write about them, ada la sekali dua kut over the years.....

There was this one time when 1MDB went against OFFICIAL GOVERNMENT policy on UEC (here) gua pun kasi la comment sket.....mana bole kasi Scholarship to students whom our Education Ministry tak recognise pun certipiket

Then there was this time when news came out about Qatar Investment Authority getting a SpeSial deal to become "Strategic Real Estate Development Partner" for the Sg Besi land (here)...always wondered why of all people 1MDB seems very smitten with the Arabs....fulus besau ke?

Apart from that I've stayed away......buang karan beb

Anyway folks...of late ni berlambak orang duk tanye kat gua privately what I think of 1MDB and whether I could write about them....

Some have sessions with me to extract about what I know....fardu kifayah

Gua sebenornye malas tahap gaban....tapi benda ni macam dah masuk tahap mengarut

I don't need to elaborate where the situation is right now... cause if you read my blog there's a very high chance that you are already "aware" of the situation unless of course your're the occasional zombie sesat

But bear in mind that your "awareness" is limited to the information and documents that are available in the Public Domain

And the Authenticity of these documents and the various information available to all of us...is what we kelantanese say......was-wah la weh

So folks why don't we do a deep dive on the mysterious chain of investment executed by 1MDB with its 1st Partner.....Petro Saudi International

This is gonna be fun as always........I guarantee one......gua Sovereign Risk kat cyberspace beb confirm tak default punya....worst case at the end of this post lu cerah sikit kepala hotak

Mana mau start gua pun garu kepala....



Tapi takpe kita sekarang ada data with a higher referential integrity to slice and dice...

And that would be the official response from 1MDB to Tun Mahathir



1. Tun Mahathir claims that “PetroSaudi did not pay a single cent” in a joint venture with 1MDB. 

PetroSaudi, via a subsidiary company, owned assets, comprising rights to oil fields in Turkmenistan and Argentina, worth approximately USD2.7 billion. These assets were sold by PetroSaudi to another subsidiary, “JV Co”, which at the time of the asset sale, was a company formed by and initially 100% owned by PetroSaudi for the purposes of a proposed joint venture with 1MDB. In return for the USD2.7 billion asset transfer, JV Co had to pay PetroSaudi USD700 million. 

This indebtedness resulted from the asset transfer. Accordingly, there was no loan made or “to settle”. On 29 September 2009, 1MDB executed a joint-venture agreement with PetroSaudi. Upon completion of an independent valuation, 1MDB contributed USD1 billion of cash in return for 40% ownership of JV Co, and PetroSaudi was left with a 60% stake in the JV Co. In effect; 1MDB’s contribution was in cash, whereas PetroSaudi’s contribution was in independently valued assets worth USD2.7 billion. 

It was part of the joint-venture agreement that, of the USD1 billion from 1MDB, USD700 million would be used to pay PetroSaudi for the initial asset transfer to JV Co (see above) whereas USD300 million would remain in JV Co. Upon satisfaction with the independent valuation, as per the joint-venture agreement, 1MDB made a payment of USD700 million to a subsidiary of PetroSaudi, and obtained legal title to 40% share of JV Co, a company with independently valued assets worth USD2.7 billion at the time. Accordingly, PetroSaudi had full rights to the USD 700 million paid by 1MDB and these funds were for PetroSaudi to use, at its discretion. 

 2. Tun Mahathir claims: “suddenly, USD 300 million of the payment by 1MDB is converted to a Murabaha loan”. He further claimed “We really don’t know where it is”.

The joint venture with PetroSaudi was terminated in March 2010, with PetroSaudi assuming 100% ownership of JV Co. 1MDB converted its USD1 billion of equity in JV Co to murabaha notes issued by JV Co, under the terms of a Murabaha Financing Agreement. PetroSaudi, as 100% owner of JV Co, fully guaranteed JV Co’s obligations under the murabaha notes.

1MDB then made further investments of USD500 million and USD330 million in additional murabaha notes issued by JV Co. In total, 1MDB invested USD1.83 billion cash in murabaha notes issued by JV Co, a company that, by then, was 100% owned by PetroSaudi following the termination of the joint venture in March 2010. In June 2012, the entire USD1.83 billion amount invested by 1MDB in murabaha notes was repaid, by way of conversion into shares of Petrosaudi Oil Services Limited, for a value of USD2.22 billion. 

In September 2012, 1MDB sold its shares in PetroSaudi Oil Services Limited for USD2.318 billion and received fund units in a Cayman registered fund. The Cayman registered fund is managed by Bridge Partners, a Hong Kong-based fund manager. These fund units were owned by 1MDB via its 100% subsidiary, Brazen Sky, and held through BSI Bank Singapore as custodian. Accordingly, 1MDB invested a total of USD1.83 billion with PetroSaudi (initially as equity, then as murabaha notes), and ultimately owned USD2.318 billion of fund units i.e. a gain over time of USD488 million.  
The facts detailed above can be verified by reference to the notes to the audited financial statements of 1MDB dated 31.03.2010, 31.03.2011, 31.03.2012, 31.03.2013 and 31.03.2014. (here)

Tun tak puas hati pi tanye lagi 

2. Tun Mahathir is repeating the same old questions about 1MDB’s dealings with PetroSaudi, a business relationship that ended in 2012, despite the fact that we have responded to this in detail on a number of occasions. With respect to the “US1.9 billion loan” Tun Mahathir has referred to, the facts are as follows: 

Further to an earlier joint venture arrangement in 2009, 1MDB invested USD1.83 billion cash in murabaha notes issued by JV Co, a company that, by then, was 100% owned by PetroSaudi following the termination of the joint venture in March 2010. 

In June 2012, this entire amount was repaid by way of conversion into shares of Petrosaudi Oil Services Limited for a value of USD2.22 billion. Subsequently, in September 2012, 1MDB sold its shares in PetroSaudi Oil Services Limited for USD2.318 billion and received fund units in a Cayman registered fund. These fund units were owned by 1MDB via its 100% subsidiary, Brazen Sky, and held through BSI Bank Singapore as custodian. Accordingly, 1MDB invested a total of USD1.83 billion with PetroSaudi as murabaha notes, and ultimately received USD2.318 billion of fund units, representing a gain over time of USD488 million. 

The information referred to above can be found in the notes to 1MDB’s financial statements. Accordingly, contrary to Tun Mahathir’s claim, 1MDB has clearly provided detailed information on this – as above – on a number of occasions, including most recently on 16 June 2015 in a direct response to a previous allegation raised by him. It is also important to highlight that a) the murabaha notes were guaranteed by PetroSaudi (thereby having a lower risk profile than equity) and b) 1MDB had an option to convert the murabaha notes into equity. Accordingly, 1MDB exercised caution by reducing its risk profile from equity to debt, thereby benefiting from a fixed rate of return above its cost of capital whilst having the right to participate in future equity upside through the conversion option. (here)

Krik Krik Krik.......

Ok lets start with 1MDB's Joint Press statement with Petro Saudi on 30th September 2009

PETROSAUDI INTERNATIONAL LIMITED AND 1MALAYSIA DEVELOPMENT BERHAD IN US$2.5 BILLION JOINT-VENTURE PARTNERSHIP, OPENS NEW DOOR TO FDIS
KUALA LUMPUR, 30 September 2009: Malaysia and Saudi Arabia today entered a new era of economic cooperation with the setting up of a US$2.5 billion joint-venture company, which will spearhead the flow of foreign direct investments from the Middle East as well as make strategic investments in high-impact projects here.
The joint-venture company ("JVC") is the result of a partnership between 1Malaysia Development Berhad ("1MDB") and PetroSaudi International Limited ("PSI"). This venture is the first undertaken by PSI in this region and underscores the confidence Saudi Arabia has in Malaysia and economic prospects here.
1MDB is wholly owned by the Government of Malaysia and was established recently to drive strategic initiatives for long-term sustainable economic development and promote inflow of FDI into the country.
PSI, based in Al-Khobar, Saudi Arabia, is a private company mandated to carry out investments which can strengthen the relationships between the Kingdom of Saudi Arabia and key countries worldwide.
The JVC's objective is to seek, explore, and participate in business and economic opportunities which result in the enhancement and promotion of the future prosperity and long-term sustainable economic development of Malaysia. It is expected to actively make investments in the renewable energy sector.
The JVC is also expected to be a vehicle for investments from the Middle East into the region, thereby giving Malaysia the edge in drawing investments from the cash- and resource-rich region.
PSI Chief Executive Officer Sheikh Tarek bin Essam bin Ahmad Obaid said: "Malaysia has long been a model of stability and development for developing countries. We believe that recent economic liberalisation policies announced by the Prime Minister will only make Malaysia a more attractive place for investors. We envisage Malaysia becoming an important partner for the Kingdom of Saudi Arabia."
Also lauding the setting up of the JVC was 1MDB Chief Executive Officer Shahrol Halmi. He said: "The JVC is set to further increase foreign direct investment from the Middle East, in particular Saudi Arabia. We will leverage on PSI's strong international presence, their networks and expertise to promote Malaysia as the preferred investment destination."
The JVC will initiate various projects in multiple sectors which are mutually beneficial as well as in line with 1MDB's mission to drive long-term sustainable economic development in Malaysia. (here)

And this is Najib's 1st Budget Speech dated 23rd of October 2009

Source MOF here


Are you ready Arul?

Arul would you be able to clarify why the Joint Press Statement a day after the execution and subsequent budget speech of the Chief Advisor and Sole Shareholder of 1MDB mentions the value of USD 2.5Billion instead of USD 2.7Billion as you mentioned in your response to Tun? What are the sources of these discrepancies?

Care to also clarify who Petro Saudi International really is? From their website (here) it seems that they are more of an Oil and Gas Player and your Press Statement says that
PSI, based in Al-Khobar, Saudi Arabia, is a private company mandated to carry out investments which can strengthen the relationships between the Kingdom of Saudi Arabia and key countries worldwide.
But your 2011 Auditors called them something else

 Sounds pretty official and "Sovereign" there not bad for a private company eh...

Oh Arul lupa tadi..... Head Office Company ni kat mana brader? Depa sumbat mana semua staff?






In the meantime would you like some kit kat Arul? or can we go on......

I bet you all want to dive into their JV Agreement

Details are pretty sketchy about it.

But before we dive deeper into the Agreement, why don't we look at another data.

These documents appeared mysteriously from the Benchmark Kencing Version (here)

Recall the Visit to the Kingdom made by our PM

Summer holiday with the Family....Giler berasap kepala doe summer kat arab




When was this actually?

Cari bagai nak rak kat Saudi's Foreign Ministry (here) benda lain pulak gua jumpa...

Anyway terserempak dengan gambo ni



Check out the so called Letter from CEO of PetroSaudi to our PM to express his interest





Baiknye PetroSaudi sampai nak bagi USD 500,000,000 discount on valuation tu brader....and still USD 2.5Billion

Strange thing about that letter is that there is NO MENTION of USD 700,000,000

Arul's statement makes me garu kepala even more....

In return for the USD2.7 billion asset transfer, JV Co had to pay PetroSaudi USD700 million. .......This indebtedness resulted from the asset transfer. Accordingly, there was no loan made or “to settle”. 
Let's examine another set of document before we go into the JV Agreement here

Arul said there is NO LOAN made or TO SETTLE

BTW brader...what happen to the USD 500,000 discount on valuation?

Well folks check out below 2 similar document, one released by Serawak Report and another from the Benchmark

Source SR here
Source Benchmark Kencing (here)




Look at the letter again folks perasan tak ada "Immediate Mobilisation of All Assets/Capital....bla bla bla"

Memang immediate betol.....JV baru je sign dah mobilise 700,000,000 USD

Apa kes?

Ok lets check out the JV Agreement, when it first "came out" gua terkejut beruk pasal ada satu benda yg nampak macam dodgy sket.....

I tweeted this on Feb 19th 2015

So far noone has come forward to dispute the Authenticity of the said JV Agreement, almost all the contents correlate to the transactions being executed & the so called letter to PM


Here a better picture of the funny clause...




Lets go back to Arul's

It was part of the joint-venture agreement that, of the USD1 billion from 1MDB, USD700 million would be used to pay PetroSaudi for the initial asset transfer to JV Co (see above) whereas USD300 million would remain in JV Co. Upon satisfaction with the independent valuation, as per the joint-venture agreement, 1MDB made a payment of USD700 million to a subsidiary of PetroSaudi, and obtained legal title to 40% share of JV Co, a company with independently valued assets worth USD2.7 billion at the time. Accordingly, PetroSaudi had full rights to the USD 700 million paid by 1MDB and these funds were for PetroSaudi to use, at its discretion. 

I wonder how it went from the JV Company (1MDB PS Ltd) owing the Parent Co (PS) to 1MDB paying a subsidiary of PS

Arul is this sequential? Like you have to pay to someone else to get the 40% Block in JV Co

The very the strange one la brader.....seriously gua tak pernah tengok benda macam ni selama berpuluh tahun lebih berkecimpung dalam Financial Market.....

Dah la kena bayar bedebap!!!

USD 700,000, 0000 tu beb......moving 700USD in the interbank FX is small I guess for Duetsche but I can imagine the spread the dealers were making....layan..

Look at this MT 103 Swift Message from Benchmark Kencin, value date is 30/09 so most likely the MYR sourced from the iMTN was converted at a Rate of somewhere around 3.4745






Ever wondered what would happen if 1MDB actually sold the shares for cash and repatriated the funds in 2010, check out the FX Rates.....agak2 berapa la FX Loss kat situ aje

Source here

Anyway folks.....that money is GONE from JVC perspective, sudah bayar hutang.....langsai....satu dollar pun tak boleh nak pakai buat ape2

Just like what Arul said

Accordingly, PetroSaudi had full rights to the USD 700 million paid by 1MDB and these funds were for PetroSaudi to use, at its discretion. 
Since we know shit all about this company (JVC or in 1MDB's annual report JCE, jointly controlled entity)...annual report pun takde, website pun takde.....satu habuk pun takde.....jangan main2 co 2.7Billion USD ni beb.....we now enter into "verifiable data"

The 1MDB Annual Report.....

Remember Arul's piece above

The facts detailed above can be verified by reference to the notes to the audited financial statements of 1MDB dated 31.03.2010, 31.03.2011, 31.03.2012, 31.03.2013 and 31.03.2014

Jom!





We will need to look at 2 Set of Documents : The Share Sale Letter Agreement and the Murabaha Financing Agreement

You may download them here and here

Not much is in the Share Sale Letter, very much repetitive with the contents of Murahaba Financing Agreement. It is here that things suddenly becomes funny again













Kepada yg malas baca dan suka tengok gamborajah




Lets go back to their Financial Statements

We need to know how these "investments" were redeemed.....



Dear Arul care to share with us why 1MDB accepted 49% (MYR 6,802,359,000) of PS Oil with further Options to purchase another 51% of PS Oil? And by the way how did the Issuer get this New Co, bapak dia (PSI) inject ke memang dah lama pegang?

In case you are wondering how BIG Petro Saudi Oil Services is.......

Try this

The listing of SapuraKencana Petroleum Bhd (SapuraKencana) on the Main Market of Bursa Malaysia signifies the successful conclusion of the massive RM11.85 billion merger exercise of two Malaysian oil and gas (O&G) powerhouses, SapuraCrest Petroleum Bhd and Kencana Petroleum Bhd. According to the company, the merger was initiated in July last year. The merger created Malaysia’s largest O&G service provider, which also ranked among the top five O&G service companies in the world by asset value. (here)

Hebat betul 1MDB ni......main berbillion billion aje....giler betik at 49% (MYR 6.8 Billion) dah kira sama level dengan Sapura Kencana doe....

Manteeeeebbs......an excellent use of Government Guaranteed Funds to generate Value for the Nation


A rather short holding period actually from 1st June 2012 to 12th September

And best part is after reading all their Financial Statements the sale of PSOil on the 12th of September an EXTERNAL PARTY is the only transaction without a Counter Party name

Why so secretive Arul?


Note: Click Open in New Tab and Zoom


Details about the Purchaser of 1MDB-IHL Ltd is rather sketchy only thing I could find is this


1MDB then sold all of 1MDB International Holdings, whose sole asset was the PSOSL stake, to Bridge Partners for US$2.3 billion, turning in a profit of some US$95 million.
To satisfy the purchase, Bridge Partners issued six interest-free promissory notes with a one-month expiry data. 1MDB then invested the proceeds by subscribing for all the shares in Brazen Sky, which in turn reinvested the sum into the SPC (here requires a login to Business Times Singapore)

I hope that Arul could shed some light about this massive transaction, it just sounds too funny when you keep accepting Notes/Papers in Return for your assets instead of using the Proceeds for your Operations or as per the Original Term Sheet and incase your're wondering what it is


1) PURPOSE : a) General Investments; b) Working capital requirements; and c) Funding of and/or contribution to a foundation established or to be established; Provided Always that any such utilisation shall be in compliance with Shariah principles; Source BNM Fast here , then search for Facility Name 1MDB


Makes me wonder what the SC thinks about all of this......

OK so now we finally get to the mystical Units that was supposed to be in Cash form sometime this year.....actually it should be in CASH form by 31st December 2014, care to share with us what exactly happened Arul? Did the Fund Manager face some difficulty in liquidating your holdings?



The whole thing is really funny don't you think so......

There's so many ifs.......give you one

If redemption was successful as of end of 2014 would 1MDB need emergency liquidity support to the tune of 950Million?

Who do we have to thank for this Arul?



Did you hear how lost he sounded?

The impressions that we have? Holy Shiite......your're MOF II beb... impression kepala hotak kau.....takde Position Statement ke from Fund Manager....

Siap ada BACKED BY SOVEREIGN WEALTH FUND?

Giler incestuous......A Sovereign wealth fund investing in units backed by Sovereign Wealth Fund

Unless of course the Assets in the Segregated Portfolio Company is actually Petro Saudi's (Royal Wealth Fund la pokcik....kalu takat sedara mara King terus boleh jadi Sovereign ke? )

Anyway.....I guess it's enough for today... Do let me know if I've missed anything or if you have supporting documents that could add more granularity to the transactions mentioned above.

Selamat Berpuasa Teman Teman Semua

Minds are like parachutes; they work best when open. -Lord Thomas Dewer