After 1MDB’s US$50m default, EPF reiterates its 'limited' exposure

1MDB, last week, was declared in default after it failed to pay a US$50.3 million debt payment, but the Employees Provident Fund (EPF) today stressed that its exposure to the state investment arm is "very limited".

EPF chief executive officer Shahril Ridza Ridzuan in a press conference today was asked whether the EPF was concerned over its investments in 1MDB in light of the latter’s default.

But Shahril reiterated how the EPF only has a share of RM200 million from the RM5 billion bond issued by the then Terengganu Investment Authority (TIA) – which accounts for four percent from the total issuance.

“That exposure is fully government-guaranteed, basically we don't have a problem with it.

“It’s never an issue in terms of being serviced by 1MDB,” said Shahril, after the release of EPF’s 2015 annual report in Kuala Lumpur today.

He however admitted that the EPF has been following the current developments with interest.

“It’s quite clearly a cause of concern that there seems to be some kind of dispute going on at 1MDB in relation to their other exposures.

“But as far as the exposure that we have, we are fairly fine with it. In any event if there's any major problems with 1MDB, the government will step in to cover the debt to all the bond holders.”

Meeting of bond holders

Shahril also confirmed that the EPF has yet to be given any notice by the trustees of the RM5 billion bond.

“As to whether or not they will be calling a meeting of bond holders on this issue, we’ll just wait and see whether the trustees deem that there's been a cross default, and whether they need to bring the matter to bond holders,” he said.

EPF’s investment committee, therefore, has yet to decide on any matter in relation to the issue as the trustees have yet to call a meeting of bond holders.

“So we’ll wait for them to call a meeting of bond holders and then we’ll decide,” said Shahril.

Options to be considered will therefore depend on suggestions put forward by the trustees to the bond holders, he added.

1MDB was declared in default after it failed to pay the US$50.3 million debt payment on billions of dollars in bonds guaranteed by Abu Dhabi state-owned sovereign wealth fund International Petroleum Investment Corporation (IPIC).

Confirming the matter, 1MDB however blamed IPIC for its refusal to assume its “obligation to pay the interest and ultimately the principal for, among others, the US$1.75 billion fixed rate 5.75 percent notes due 2022, issued by 1MDB Energy (Langat) Limited”. -Mkini