Hence, added Pua who is also DAP National Publicity Secretary, 1MDB was clearly attempting to deceive the public with a 60 per cent “land sale valuation” where 1MDB would collect RM7.41 billion, because it was simply not a land sale transaction.
To avoid losing further credibility, said the MP, “once again we call upon the 1MDB directors to immediately agree to make public the Share Sales & Purchase (S&P) Agreement between 1MDB and the Iskandar Waterfront Holdings-China Railway Engineering Corporation (IWH-CREC) Consortium.”
“This is to ensure that Malaysians can understand the exact terms of the transaction, and not the fancy spruced-up versions which 1MDB wants them to believe.”
Only a “clarification” from 1MDB over the actual price paid for a 60 per cent stake in Bandar Malaysia had the capability of leaving Malaysians and the financial community more confused than ever before, charged Pua, who said he had to read 1MDB’s statement on Tuesday a few times before he could laugh out loud at the response given by corporate bond market specialist, Arul Kanda Kandasamy, coincidentally celebrating his first anniversary as the 1MDB President.
Pua was commenting on 1MDB clarifying that the valuation contained in the announcement made by CREC to the Hong Kong Exchange (HKEx) refers not to the land sale valuation, but instead to their estimated share of the net equity value of the Bandar Malaysia project, based on certain assumptions, which were subject to further negotiations during the completion period between January and June 2016. “The starting point of any net equity value calculation, is the land sale valuation of RM12.35 billion, of which the Consortium’s 60 per cent share equates to RM7.41 billion,” Pua quoted 1MDB as saying on Tuesday. “The explanation was drafted with the sole intent to badger and confuse readers into submission by obfuscating the facts with clever language and incongruous financial gobbledygook.”
As far as “we have been told” by both 1MDB and China Railway, recalled Pua, IWH-CREC acquired 60 per cent of the shares/equity of 1MDB’s subsidiary, Bandar Malaysia Sdn Bhd”.
If that is the case, said Pua, the only relevant number to be considered was how much IWH-CREC paid for the shares. “CREC has announced to their regulatory authority, the Hong Kong Exchange, that they paid RM5.279 billion.”
Again, Pua reiterated that the valuation of the land held by Bandar Malaysia, whether it’s RM12.35 billion or RM20 billion or only RM4.2 billion, was irrelevant, because 1MDB will only be paid RM5.279 billion for the 60 per cent stake in Bandar Malaysia Sdn Bhd.
Hence, continued Pua, 1MDB was clearly attempting to deceive the public with a 60 per cent “land sale valuation” where 1MDB would collect RM7.41 billion, “because it is simply not a land sale transaction”.
Whether intentionally or otherwise, cautioned Pua, 1MDB has made a major mistake in the attempt to boast bigger numbers for its December 31 announcement to make the Prime Minister look good. “Now, instead of admitting that it has made the mistake, 1MDB was trying to cover up for the glaring boo-boo with an utterly laughable attempt to explain away the discrepancies.”
Even 1MDB’s endeavour to bridge the gap by claiming that “adjustments may be made to the RM7.41 billion land sale valuation, depending on whether or not certain Bandar Malaysia related liabilities can be passed to the Consortium” does not hold water, said Pua. “This is because China Railway would have been required to disclose to the Hong Kong Exchange and their shareholders such a material contingent difference between the price paid by the joint venture i.e. RM5.279 billion, and a possible increase to RM7.41 billion.”
The HKEx is certainly not an exchange regulatory regime to be trifled with, unless China Railway wants to unnecessarily risk stringent penalties on itself, advised Pua.
The initial confusion arose, recalled Pua, because 1MDB announced that the IWH–CREC Consortium valued 100 per cent of the Bandar Malaysia land at RM12.35 billion. “Accordingly, its 60 per cent share of land will cost RM7.41 billion.”
“1MDB will receive a 10 per cent deposit of RM741 million upon execution of the Share Sale and Purchase Agreement, with completion of the transaction expected by end June 2016.”
On the other hand, contrasted Pua, China Railway Group announced to the HKEx that on December 31, 2015, the Joint Venture entered into the Share Sale Agreement with 1MDB Real Estate (1MDBRE), pursuant to which the Joint Venture will purchase 60 per cent of the equity interest in BMSB held by 1MDBRE at a price of MYR5.279 billion.
From 1MDB’s announcement, it appears that the company (1MDB) would be paid RM7.41 billion but from China Railway Group’s announcement, the latter will only be paying RM5.279 billion. “This has caused many to ask questions with regards to the missing RM2.13 billion.”