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Sun 3 Jul 2016 03:43 PM

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Malaysian officials in Abu Dhabi 'to resolve row with IPIC' - report

IPIC is seeking $6.5 billion in funds allegedly lost through deal with 1MDB

Malaysian officials in Abu Dhabi 'to resolve row with IPIC' - report
1 Malaysia Development Berhad (1MDB). (Manan Vatsyayana/AFP/Getty Images)

A delegation from Malaysia is understood to have arrived in Abu Dhabi last week for talks on how to resolve a long-running dispute between the International Petroleum Investment Company (IPIC) and Malaysian state fund 1MDB.

The two government investment funds are embroiled in a dispute over a billion-dollar-plus debt restructuring.

The Wall Street Journal reported on Thursday that officials from both parties were due to meet in Abu Dhabi to discuss how to resolve the situation.

The row hinges on a 2012 deal in which IPIC guaranteed $3.5 billion of bonds to 1MDB, and 1MDB agreed to repay $1.4 billion in collateral to Abu Dhabi.

IPIC claims 1MDB defaulted on the agreement, failed to pay interest on the bonds and failed to pay another $2.1 billion in subsequent payments, forcing Abu Dhabi to make the payments instead.

It is alleged that the payments were made to a company in the British Virgin Islands with a similar name to IPIC subsidiary Aabar Investments – but IPIC denies any links with this BVI-registered company.

IPIC has suffered substantial losses as a result, and said last month it had filed an arbitration claim in a London court seeking the full $6.5 billion in compensation.

In a filing on Thursday, WSJ reported, IPIC announced a $2.6 billion net loss and said it was taking a $3.5 billion provision related to the guarantees on 1MDB bonds.

It came the day after the Abu Dhabi government announced plans to merge IPIC with Mubadala Development Company, creating a new fund worth around $135 billion, according to Reuters’ estimates.

Analysts said afterwards that the merger proposal was likely to have been driven by the row with 1MDB, which has hit IPIC’s coffers.

One UAE-based banker reportedly told Reuters: “It is almost certainly linked to that. IPIC's name has been somewhat tainted by it.”

WSJ reported that 1MDB is slowly shrinking, too, as most of its assets have been sold or transferred to the country’s Ministry of Finance. Both 1MDB and IPIC declined to comment, it said.

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