On 24 March 2015 I had asked the Finance Minister the “commissions, fees and charges” which were stated in the bond prospectuses for the US$3 billion, US$1.75 billion and US$1.75 billion issuance by 1MDB Global Investment, 1MDB Energy and 1MDB Energy (Langat) respectively.
Because the Deputy Finance Minister, Datuk Ahmad Maslan had previously claimed that part of the above “commissions, fees and charges” were actually discounts offered for bond investors, I had also asked for the breakdown of the fees and the discounts offered for these bonds.
Unfortunately, absolutely none of my questions were answered by Dato’ Seri Najib Razak, the Minister of Finance. Instead of answering the factual questions, the Minister proceeeded to give his valued opinion in convoluted sentence structures.
He said that the Goldman Sachs’ fees from the bond issuance are reasonable relatively to the size, time-frame, illiquidity and risk of the issuance. He also added that the discounts for the bonds were normal for most bonds.
This is the reason why we need a new Finance Minister who actually understand numbers and the financial markets, instead of one who Dato’ Seri Najib Razak who doesn’t seem to realise, or pretends not to, that we have been royally screwed of the bond exercises. And if he is so certain of the “reasonableness” of the fees and discounts, why is he so insistent on hiding these figures from the public?
Does the Finance Minister not realised that US$196 million (RM630 million) and US$283 million (RM906 million) were deducted for “certain commissions, fees and expenses” as stated in the prospectuses for 1MDB Energy and 1MDB Global Investment? These amounts worked out to a staggering 11.2% and 9.4% of the funds raised.
How is it that Tenaga Nasional and Penerbangan Malaysia Bhd were able to raise US$350 million and US$1 billion by paying only 2% and 0.5% in fees and expenses?
For similarly-sized issues, the Mexican and Uruguayan governments successfully issued bonds amounting to US$3.9 billion and US$2.0 billion by deducting only 0.2% and 0.1% for fees and expenses respectively. Is our Finance Minister telling us that Malaysia as a country is 100 times less credit worthy than the Uruguayan government as our fees are in excess of 10% on average?
What is more interesting is the fact that other Goldman Sachs fund-raising exercises were substantially cheaper as well, so Dato’ Seri Najib Razak cannot use the excuse that those were Goldman’s standard rates. For example, Goldman charged another Malaysian company, Equisar International Inc only 1.3% in fees. On the other hand, Apple Inc and the Mexico Government paid Goldman Sachs fees and expenses of only 0.3% and 0.2% respectively.
The failure of the Ministry of Finance to address these issues seriously is despicable as Malaysians have the right to know how 1MDB lost billions of ringgit via such exhorbitant “comissions, fees and expenses” while now requiring a tax-payers’ bailout.
We call upon the Auditor-General to demand the complete list of investors who bought these bonds via Goldman Sach and determine if the opaque placements with the hidden discounts were able to make hundreds of millions of ringgit at 1MDB’s, and ultimately at the rakyat’s expense.