By Kane Wu and Yantoultra Ngui
Malaysian state investor 1Malaysia Development Bhd (1MDB) has delayed a more than $3 billion IPO due to a longer-than-expected due-diligence process and negotiations around the restructuring of a 5.5 billion ringgit ($1.7 billion) loan, people familiar with the matter said.
The IPO, which was due to be launched in the fourth quarter of this year, is now likely to take place in the first few months of 2015 at the earliest, said the people, who declined to be named as the matter remained confidential.
1MDB, seen as a cross between a sovereign wealth fund and a private investment vehicle, is struggling with a debt burden exceeding $11 billion. It plans to reduce some of this debt by selling its power assets via the IPO.
In May, the state fund restructured a 5.5 billion ringgit bridging loan into two tranches: a 3.5 billion loan due after 123 months and a 2 billion loan due in November, according to data from LPC, a Thomson Reuters unit specialising in loans.
The 2 billion tranche, however, is likely to be extended for several more months or pared down through internal funds, easing the pressure off 1MDB to urgently pay off some of its debt, the sources said.
Shahriza Embi, senior vice-president of corporate communications at 1MDB, did not reply to emails seeking comment.
According to LPC, Maybank International Ltd and RHB Bank are mandated lead arrangers and bookrunners of the restructured loan. Maybank executives declined to comment while RHB Bank officials were not immediately available to comment.
The 5.5 billion ringgit bridging loan has already been extended twice. It was originally part of a 6.17 billion loan 1MDB took from Maybank Investment Bank in 2012.
1MDB has come under criticism from investors and politicians for the size of its debt and its perceived lack of transparency, among other issues.
Christian de Guzam, an analyst at credit ratings agency Moody's, said 1MDB's rating was unlikely to be affected by the delay in the IPO because its debt is guaranteed by an investment company backed by the government of Abu Dhabi, in the Gulf Arab state of the United Arab Emirates.
Creditors are also appear unconcerned by the delay. 1MDB's $3 billion bonds due 2023 are trading at a spread of 245 basis points over U.S. Treasuries, down from last year's trading range of 270 bps to 290 bps above U.S. Treasuries.
Last year, the range had shot up as 1MDB scrambled to obtain a time extension on its bridge loan.
