Jho Low Profited from Pre-1MDB Entity’s RM5B Bond Sale

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Wanted businessman Low Taek Jho benefited from a RM5 billion bond issue in 2009 by 1Malaysia Development Bhd’s (1MDB) predecessor, Terengganu Investment Authority (TIA), a report says.

  • Suspicion was raised about the bond sale, but the matter was not pursued
  • Sold at a steep discount on a bought deal, not through tender, bond sale had raised a “hue and cry among bankers at the time” 
  • Najib’s brother Nazir among those who complained to Bank Negara, questioning why the government-guaranteed bonds had to pay higher interest and yet were sold at a discount
  • The sale enabled two entities and their clients to make a big profit on a quick flip
  • US$700m transferred to Jho Low’s company Good Star

Proceeds of the sale ended up in 1MDB’s joint venture with PetroSaudi International, from where US$700 million was moved to his company, Good Star Ltd.

The Edge Malaysia business weekly detailed the money trail of the bond issue in its latest edition this weekend, following a report by Bloomberg earlier this week that the authorities had begun probing Low’s role in TIA.

Low, popularly known as Jho Low, was TIA’s adviser before it was taken over by the Finance Ministry and turned into 1MDB under the Najib Razak administration.

Bloomberg had reported that Low had profited from the sale that involved local banking group AMMB Holdings Bhd and a Thai brokerage Country Group Securities.

The Edge said the sale of the 30-year-Islamic bonds were conducted for TIA by AmInvestment Bank Malaysia and had raised a “hue and cry among bankers at the time” as they were sold at a steep discount on a bought deal and not through tender.

Among those who had complained to Bank Negara Malaysia and the Securities Commission was then CEO of CIMB, Nazir Razak, who questioned why these government-guaranteed bonds had to pay high interest of 5.75% and yet were sold at a discount. Nazir is also Najib’s younger brother.

AmInvest had sold the bonds at a 13% discount to two entities, Thai brokerage Country Group Securities Pcl and Singapore firm, Aktis Capital Singapore.

The bank then resold the bonds on behalf of both companies to local investors comprising pension funds and insurers, for a higher price.

“(This enabled) the two entities and their clients to make a big profit – an estimated RM559 million on a quick flip,” reports The Edge.

The paper said then TIA chief executive, Shahrol Halim, had approved the bond sale, despite objections by the Terengganu government, which was a TIA shareholder.

From the RM559 million profits, Thai brokerage Country Group instructed AmInvestment to send US$113 million to Acme Time Pte Ltd in Singapore. The company’s account in RBS Coutts bank was under the control of Low and his associate Eric Tan Kim Loong.

From there, US$20 million was transferred to PetroSaudi director Tarek Obaid after it had signed a US$1 billion joint venture with 1MDB.

The US$1 billion for the joint-venture also came from the profits of the “quick flip” of the TIA bonds, The Edge said.

From there, US$700 million was then transferred to Low’s company, Good Star Ltd.

Citing sources, The Edge said regulators at the time made enquiries about the suspicious nature of the bond sale but did not pursue the matter.

However, they are now looking at why AmInvestment did not sell the bonds directly to investors and instead allowed Country Group and Aktis Capital to make large profits through a flip.

Investigators are also looking at who are Aktis Capital’s clients who have profited at the expense of Malaysian taxpayers. It is believed that the clients include well-connected Malaysians.

They are also hoping to uncover who in AmInvestment approved the transfer of US$113 million to Acme Time in Singapore.

The Edge’s sources also said that Country Group was used in the bond sale possibly because Low’s father, Larry Low Hock Peng, has Thai roots and knows some of Thailand’s leading businessmen. – TMI