Najib Signed Guarantee Letter for RM2B KWAP Loan to SRC, KWAP Rules Breached

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The Kuala Lumpur High Court was told that Datuk Seri Najib Razak signed a government letter of guarantee (LOG) for SRC International Sdn Bhd on RM2bil financing from Retirement Fund Incorporated (KWAP) for a period of 10 years.

  • Najib had in a handwritten note approved SRC’s 2011 application for an RM3.95bil loan from KWAP
  • Loan to be given in advance of government guarantee to be submitted within 10 days – first time such a procedure happened
  • Breach of rules of KWAP’s policy and guidelines for financing approval of loan to SRC
  • Loan exceeded shareholders’ equity limit as SRC only had an equity of RM1mil, yet approved loan applications amounted to RM4bil
  • Breach of rules whereby the amount of KWAP investment in the form of borrowings must not exceed 10% of the investment allocation in domestic fixed income
  • Investment working paper for KWAP’s RM4bil loan for SRC prepared in a rush
  • KWAP requested a lot of documents from SRC before loan could be considered, but received only 25%

KWAP former assistant vice-president (Fixed Income Department) Amirul Imran Ahmat, 39, while reading out his witness statement, said the letter was signed by Najib as then-prime minister and finance minister on March 27, 2012.

Afif Abd Halim/TMI

Continuing his testimony yesterday, Amirul Imran said KWAP received a letter from the Finance Ministry dated March 28, 2012, which was an approval by the government to provide a guarantee to SRC, as endorsed by the Cabinet on Feb 8, 2012.

“This letter also requested for consideration from KWAP to channel the sum in advance with the Finance Ministry pledging to submit the government guarantee within 10 days,” he said during examination-in-chief by Deputy Public Prosecutor Datuk Ishak Mohd Yusoff on the 13th day of Najib’s trial.

When asked by Ishak on whether it is normal for people who borrow money to get it in advance, prior to a letter of guarantee, Amirul said it never happened before.

“On March 28, 2012, I was informed by Amirah Muhamad Nor from KWAP’s Investment Support Services Department that additional financing of RM2bil had been withdrawn by KWAP and credited into SRC’s account,” he said.

He added that KWAP approved the loan in March 2012 during an Investment Panel meeting headed by Ahmad Norhisham Hassan.

Amirul further testified the additional RM2 billion was intended only for investment in natural resources and working capital and not for general investment.

“The loan from KWAP was not to be used for corporate social responsibility as social, charitable or political purposes were not stated in the loan agreement.

“The RM2bil was also not meant for investment in fund management or in an asset management company, in or outside the country for profit,” he said.

Amirul also said he was under pressure while preparing an investment working paper for KWAP in regard to the RM4 billion loan for SRC.

He revealed that he was required to complete the working paper in a hurry.

“I was asked by management to expedite the application.

Firdaus Latif

“There was a flurry of meetings in just a short time. If you missed a meeting, you go for the next one. But here every meeting was a rush. There was so much pressure to accelerate everything,” he said.

Amirul said KWAP had requested a lot of documents from SRC before the loan could be considered, including plans on how the money would be utilised.

However, he only received “25 per cent” of the needed documents but proceeded with drafting the loan agreement anyway because there was pressure to do so.

Earlier in his witness statement, Amirul said there had been a breach of rules of KWAP’s policy and guidelines for the first financing approval of RM2 billion by KWAP to SRC.

He said the loan to SRC exceeded the shareholders’ equity limit as SRC only had an equity of RM1 million, yet the approved loan applications amounted to RM4 billion.

Amirul added there was also a breach of the rules whereby the amount of KWAP investment in the form of borrowings must not exceed 10% of the investment allocation in domestic fixed income.

Amirul previously testified that the Malaysian government had also provided a guarantee in 2011 for KWAP’s first loan of RM2 billion to SRC. That letter of guarantee dated August 26, 2011, was signed by then-second finance minister, Datuk Seri Ahmad Husni Hanadzlah.

In a handwritten note, Najib had agreed with KWAP giving an RM3.95 billion loan to SRC.

KWAP later only issued RM2 billion in this first loan.

Amirul said that the two loans to SRC amounting to RM4 billion were “among the biggest” agreed by KWAP throughout his years of working with the fund.