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Economy

1MDB settles final debt to Abu Dhabi sovereign fund

Malaysian PM eyes third term as government tries to lay ghost of 1MDB to rest

A 1MDB protester at a demonstration organized by pro-democracy group Bersih, calling for Malaysian Prime Minister Najib Abdul Razak to resign, in Kuala Lumpur, Malaysia on Nov. 19, 2016.   © Reuters

KUALA LUMPUR -- Sovereign wealth fund 1Malaysia Development Berhad said Wednesday it had repaid the final tranche of the $1.2 billion owed to its Abu Dhabi counterpart over a dispute regarding interest payments on two bonds worth $3.5 billion.

Under a deal reached in April at the London Court of International Arbitration, 1MDB agreed to pay the amount in two installments by the end of 2017 to International Petroleum Investment Co. 1MDB will also assume responsibility for all future interest and principal payments on the bonds issued by its units that were guaranteed by IPIC.

IPIC has confirmed it had received the payment from 1MDB, putting to rest the controversies around the issue ahead of an upcoming election in Malaysia. 

A brainchild of Prime Minister Najib Razak, the now defunct 1MDB was set up in 2009 to attract foreign direct investment to Malaysia's energy sector. It was however embroiled in financial scandals from mid-2015, from accumulating mountains of debts that resulted in bailouts to probes by foreign governments on allegations of money-laundering and defaults on interest payment of its debts. 

It was considered a thorn in the flesh of a government facing an election by August 2018, with public opinion highly critical of how it had handled the scandal. But the latest announcement will likely put the ghost of 1MDB to rest, as Najib geared himself to secure a third term in office.

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