Najib refutes claims of tycoon's role in 1MDB.

Low Taek Jho has never worked in the company, says Malaysian PM.

A billboard for 1Malaysia Development (1MDB) in Kuala Lumpur. Penang-born tycoon Low Taek Jho has been making headlines in connection with alleged fraud in the company that is now deep in debt. -- PHOTO: REUTERS -

KUALA LUMPUR - Prime Minister Najib Razak has refuted claims that a Penang-born tycoon is involved in the decision-making of 1Malaysia Development (1MDB), a state-owned investment company now awash in red ink.

"Low Taek Jho has never worked in 1MDB and all decisions and transactions are made by the company's management and board of directors," Datuk Seri Najib said in a written reply to Wangsa Maju MP Tan Kee Kwong on Monday.

Dr Tan had asked in Parliament last Thursday if there was any connection between Mr Low and 1MDB, according to the Astro Awani TV station in an online report.

Mr Low has been making headlines of late for alleged fraud linked to the troubled power plant and property fund.

He has denied any wrongdoing over 1MDB's investment in a US$2.5 billion (S$3.5 billion) oil venture with Saudi energy firm PetroSaudi, which failed to take off.

The Cabinet ordered the Auditor-General to review 1MDB's books after a series of exposes related to the 2009 joint venture.

1MDB has debts of more than US$11 billion, a burden weighing on Malaysia's sovereign rating and one which has also contributed to ringgit weakness in recent months.

Mr Najib, who chairs 1MDB's advisory board, also said a letter of support the government had written for a 10-year US$3 billion bond issued in 2013 by 1MDB Global Investments - a fully owned unit of the fund - stood.

But he added it would become effective only if there was a lack of funds for payment and after considering 1MDB Global's internal funds and assets, Reuters reported.

The bond yields over 7 per cent compared to 3.9 per cent for equivalent Malaysian government bonds.

While the Prime Minister's statement provides some reassurance, investors remain concerned about the health of the rest of 1MDB's balance sheet.

The letter of support differs from an explicit guarantee because it is not legally enforceable, although global rating agencies such as Standard & Poor's treat it at par with a guarantee as it meets their criteria.

Malaysian authorities have previously said the country has provided an explicit guarantee for only 5.8 billion ringgit (S$2.2 billion) of the fund's loans.

"Just as a rose by any other name smells just as sweet, a government loan guarantee by any innocuous names like a 'letter of support' remains tantamount to a guarantee," opposition politician Tony Pua, one of 1MDB's most vocal critics, was quoted as saying by the Free Malaysia Today website.

The Straits Times / Asia                    Published on Wednesday,18 March 2015

BACKGROUND STORY

NO INVOLVEMENT

Low Taek Jho has never worked in 1MDB and all decisions and transactions are made by the company's management and board of directors

- Malaysian Prime Minister Najib Razak, in a written reply to Wangsa Maju MP Tan Kee Kwong on Monday.