Malaysia's Finance Minister Tengku Datuk Seri Zafrul Aziz announced last week, with regards the government's negotiations with the Goldman Sachs:
"The government remains committed to recovering other outstanding assets. The settlement includes a cash payment of US$2.5 billion and a guarantee of a full recovery value of at least US$1.4 billion in assets that are traceable to the diverted proceeds from the three bond transactions".
The Malaysian Government news agency Bernama also reported:
Goldman Sachs, at its cost, will also assist the government of Malaysia by appointing an asset recovery specialist to recover other related assets currently lying outside Malaysia.Goldmans Sachs announcement to the SEC pursuant to continuous disclosure rules about the same matter states, on the other hand:
The Goldman Sachs Group, Inc. (NYSE: GS) (Goldman Sachs) today announced that it has reached an agreement in principle with the Government of Malaysia to resolve all the criminal and regulatory proceedings in Malaysia involving the firm, including pending criminal proceedings against subsidiaries of Goldman Sachs and certain of their current and former directors, relating to 1Malaysia Development Berhad (1MDB).
The agreement in principle would involve the payment to the Government of Malaysia of $2.5 billion and a guarantee that the Government of Malaysia receives at least $1.4 billion in proceeds from assets related to 1MDB seized by governmental authorities around the world. In connection with the guarantee, Goldman Sachs performed valuation analysis on the relevant assets and believes based on that analysis that the guarantee does not present a significant risk exposure to the firm.
Note that Goldman refers to "assets related to 1MDB seized by governmental authorities around the world", while Zafrul refers to "a guarantee of a full recovery value of at least US$1.4 billion in assets that are traceable to the diverted proceeds from the three bond transactions".
Readers will note that the Goldman statement is constrained to "1MDB seized by governmental authorities around the world" while the Malaysian Government refers to assets that are traceable to the diverted proceeds from the three bond transactions". The differences are not mere semantics for SEC disclosure requirements are stringent. Additionally should Goldman shareholders suffer any loss as a result of anything that has not been properly disclosed, the liabilities arising from shareholder class actions can be significant.
Meanwhile Zafrul and the Malaysian Government have said nothing about Goldman's Signum Magnolia bonds, which are backed by 1MDB bond coupon payments made by the Malaysian Government.
TO BE READ WITH
Sunday, October 7, 2018
1MDB and the USD 28 Billion Signum Magnolia Ltd of the Cayman Islands.
by Ganesh Sahathevan
IPIC made an announcement to the London Stock Exchange on 10 October 2018.The announcement concerned ,among other things, the resumption of its !MDB guarantee obligations by Abu Dhabi's Mubadalla.The announcment included these statements:
IPIC made an announcement to the London Stock Exchange on 10 October 2018.The announcement concerned ,among other things, the resumption of its !MDB guarantee obligations by Abu Dhabi's Mubadalla.The announcment included these statements:
Signum Guaranteed Obligations means the notes and loans of Signum Magnolia Limited which are collateralised by the USD 1.75 Billion 5.75% Guaranteed Notes due 2022 of 1MDB Energy (Langat) Limited guaranteed by 1MDB and further guaranteed by IPIC."
There does not appear to be any mention of Signum Magnolia Limited in any previous IPIC announcement which concerned 1MDB.
Signum is a Cayman Island incorporated company. However Emirates NBD Bank describes in its 2012 Annual Report as a Malaysian company:
Some of the notable transactions concluded during the year included acting as mandated lead arranger, advisor and bookrunner for syndicated loans valuing USD 6.5 billion, arranged for high profile clients like Signum Magnolia Limited-Malaysia,
Signum bonds pay a coupon of 4.805%. The bond was issued on 07.01.2013 and has a term of up to 02.11.2022. The company is able to issue bonds with a face value of up to EUR 25 Billion , or USD 28.8 Billion. It is not clear if it has already issued bonds up to the maximum allowable.
There does not appear to be any mention of Signum Magnolia Limited in any previous IPIC announcement which concerned 1MDB.
Signum is a Cayman Island incorporated company. However Emirates NBD Bank describes in its 2012 Annual Report as a Malaysian company:
Some of the notable transactions concluded during the year included acting as mandated lead arranger, advisor and bookrunner for syndicated loans valuing USD 6.5 billion, arranged for high profile clients like Signum Magnolia Limited-Malaysia,
Signum bonds pay a coupon of 4.805%. The bond was issued on 07.01.2013 and has a term of up to 02.11.2022. The company is able to issue bonds with a face value of up to EUR 25 Billion , or USD 28.8 Billion. It is not clear if it has already issued bonds up to the maximum allowable.
It is also unclear where and to whom the coupon differential of 0.895% is going to.Given the USD 1.75 Billion face value of the 1MDB bonds, the differential works out to approximately USD 160
Million (given half yearly coupon payments and accounting for compounding).
This type of secrecy does not sit well with professed ethos of New Malaysia.
END
AND
Goldman 1MDB bonds stashed in Caymans
- The AUSTRALIAN, 11:00PM OCTOBER 21, 2018
Goldman Sachs stashed $US1.75 billion ($2.5bn) in bonds issued by looted Malaysian sovereign wealth fund 1MDB in a special-purpose vehicle in the Cayman Islands called Signum Magnolia, it can be revealed.
Signum Magnolia then sold synthetic loan instruments backed by the bonds to about 10 investors, mainly insurers hungry for high-interest instruments carrying a government guarantee.
The proceeds of many of the bonds issued by 1MDB were allegedly looted by Malaysian businessman Jho Low, who had no formal role at the fund, and spent on jewels, luxury real estate, celebrity-studded parties and former Malaysian prime minister Najib Razak’s successful 2013 re-election campaign.
Mr Low, who is believed to be somewhere in China, has been charged with money laundering offences by Malaysian authorities but denies any wrongdoing.
Signum Magnolia’s existence, and the existence of the notes and loans it sold, were revealed only last week in a London stock exchange filing by Abu Dhabi sovereign wealth fund IPIC, which guaranteed bonds issued by 1MDB and organised by Goldman Sachs.
IPIC has asked holders of about $US6.5bn in bonds issued by 1MDB to allow it to swap out its guarantee in favour of one granted by another Abu Dhabi fund, Mubadala, at a series of meetings in London on October 31.
In deals masterminded by its controversial former head of Asia, Tim Leissner, that reportedly reaped the investment bank as much as $US600m in fees, Goldman Sachs used its balance sheet to buy all the bonds, which were issued between 2012 and 2013, and then sold them on to end investors.
However, in the case of the $US1.75bn in bonds, issued in 2013 by 1MDB subsidiary 1MDB Energy (Langat) and paying a coupon of 5.75 per cent, Goldman Sachs flipped them to Signum Magnolia rather than directly selling them to end investors.
Malaysia defaulted on $US50m in coupon payments due on the bonds in 2016, sparking a showdown between the country and IPIC over who was liable for maintaining them, but payments have been resumed under a deal struck last year.
After buying the bonds from Goldman Sachs, Signum Magnolia sold two types of instruments backed by them — collateralised linked loans and collateralised linked investments — to investors.
While the notes and loans are advertised as paying a rate of 4.805 per cent, Bloomberg data shows that at least three different series were issued, paying as much as the 5.75 per cent face value of the bonds and as little as 4.632 per cent.
The difference in coupon is believed to in part have contributed to the monster fee Goldman Sachs earned on the 1MDB bond deals.
However, it is believed investors may also have received some of the benefit in the shape of a discount at the time they bought the notes.
The coupon paid is also believed to relate to the risk assumed by each purchaser.
Bloomberg data shows the most recent tranche of Signum Magnolia notes was issued in 2014, and it is believed any exposure to the underlying bonds was transferred off Goldman Sachs’ balance sheet by the end of that year.
Market sources said one of the reasons for using the Signum Magnolia vehicle was IPIC’s reluctance to flood the market with high-yield paper bearing its guarantee that could crowd out its own bonds — although the notes and loans are also effectively guaranteed by the Abu Dhabi fund.
Executives at the sovereign fund were also unhappy because other bond issuers who had noted its willingness to back 1MDB’s bonds were approaching it for a guarantee.
Who owns the notes and loans issued by Signum Magnolia is largely unclear.
Taiwanese bancassurance Cathay Financial Holdings holds instruments issued by Signum Magnolia among its assets, according to its annual report.
In its 2012 annual report Dubai bank Emirates NDB said it acted “as mandated lead arranger, adviser and bookrunner for syndicated loans”.
BEN BUTLER
BUSINESS REPORTER
Business reporter Ben Butler has covered everything from tractors to fashion to corporate collapses. He has previously worked for the Herald Sun and as a senior business reporter with The Age and Sydney Morning... Read more
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