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Business

Sovereign fund repatriates billions from Cayman Islands

KUALA LUMPUR -- Bowing to pressure, Malaysian sovereign fund 1Malaysia Development Berhad (1MDB) said on Tuesday that it has fully repatriated $2.318 billion invested in a fund in the Cayman Islands under the regulatory supervision of the Cayman Monetary Authority.

     1MDB had been severely criticized lately by politicians on all sides and the domestic media for a lack of transparency in its business dealings.

     The 100% government-owned fund has business interests in energy and real estate, and a board of advisors chaired by Prime Minister Najib Razak.

     The funds in question originated from a loan provided to PetroSaudi International in 2011. Both parties decided not to proceed with some joint-venture projects. In order to avoid foreign exchange losses by bringing the funds back into Malaysia, 1MDB parked the funds in the Cayman Islands' fund.

     Mahathir Mohamed, Malaysia's former prime minister, and other critics accused 1MDB of overpayment for energy assets in recent years and keeping the nation in the dark about the funds sitting in the Cayman Islands.

     1MDB maintained that it operates independently, and that all its investment decisions are made in the interests of the national economy.

     On its website, 1MDB defended the premium it paid for some power plants, which it argued was "commensurate with their existing and future potential". It also wanted to bring closure to the issue of the Cayman Islands' funds.

     "1MDB hopes that the redemption of these funds, in full, draws a line under this matter," President Arul Kanda said in a press release.

     The Financial Daily, a local newspaper, reported on Jan. 6 that 1MDB has also came under scrutiny for failing to repay a loan facility of 2 billion ringgit ($563 million). The debt with lenders that include Maybank and RHB Bank should have been settled by November. 1MDB insisted it had not defaulted but merely asked for a repayment extension.

     The fund logged a net loss of 665.3 million ringgit on revenue of 4.3 billion ringgit for the fiscal year ending in March 2014. It was established in 2009 and recently appointed Kanda as president, a Malaysian lawyer by training. Kanda headed the investment arm of Abu Dhabi Commercial Bank in the Middle East prior to his appointment. On his watch, 1MDB has undertaken a strategic review of its investment portfolio to assess true values.

     "It is time for [1MDB] to silence its critics and deliver against its stated objectives," the fund's management said in a press release on Jan. 5.

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