1Malaysia Development Berhad (1MDB) is set to sell its stake in a high-profile property to a Chinese-owned consortium for $1.7 billion, as the fund has been bogged down by corruption allegations and soaring debt. The state investment fund, founded by Malaysian Prime Minister Najib Razak in 2009, has accumulated a debt of nearly $10 billion over the years and has been accused of mismanagement amid a corruption scandal.
1MDB announced Thursday, according to Financial Times, that it would offload 60 percent of its share in Bandar Malaysia venture in Kuala Lumpur to a joint venture that includes Malaysia’s Iskandar Waterfront Holdings and China’s state-run China Railway Construction Corporation. The sale, which comes less than two months after 1MDB agreed to sell its power holdings to China General Nuclear Power, is expected to be completed not before June 2016. The sale of 1MDB’s power holdings was worth 9.83 billion ringgit ($2.28 billion) and brought the fund’s total agreed asset sales to over $4 billion. By March 2014, the fund’s outstanding loan was at about $11 billion.
The fund, whose finances still remain opaque, got permission from the country’s company regulator to file its 2014-2015 accounts after the Sept. 30 deadline saying that the regulators in the country were holding back key documents. The U.S., Switzerland and Hong Kong have launched investigations related to the fallout with 1MDB's troubles, but the fund claims is has not found any criminal dealings in its transfers from the Middle East to the Cayman Islands, the Financial Times reported.
The corruption scandal involving 1MDB and Najib began in July when the Wall Street Journal reported that about $700 million was deposited to Najib’s personal account and claimed that it may have come from the fund. Najib and the fund denied the allegations and said the money was from a donor in the Middle East to support the prime minister’s political campaign in 2013.
Earlier this month, Najib, who had threatened to sue the Journal over the report, had said that he “will not surrender” to critics.
"What's important is that I am on the side of right, and the truth will prevail," Najib reportedly said, adding: "I am a gentleman!"