IPIC to 1MDB: You have 5 days



"Due to the need for additional regulatory approvals, the receipt of those funds has been delayed to August", 1MDB said. Clearly impatient, Abu Dhabi granted a mere five-business day grace period for 1MDB to make the payment before additional obligations kick in.

"We do not expect this bilateral dispute to impact Malaysia's sovereign ratings at this point", said YeeFarn Phua, an analyst at S&P Global Ratings.

She said that while Putrajaya has given assurances that the country's economy is doing well, the public were still struggling with living cost issues and unemployment.

The amount due is part of the US$1.2 billion that 1MDB had agreed to pay under the settlement agreement that IPIC and 1MDB had reached in April. "Should that happen, it will worsen Malaysia's fiscal metrics". The ringgit was little changed as of 5:05 p.m.in Kuala Lumpur. 1MDB's 5.99 per cent notes due 2022 were little changed at 108.6 to the dollar on Tuesday, according to prices compiled by Bloomberg. Five-year credit-default swaps protecting Malaysia's sovereign notes were at 81 basis points, near the lowest in nearly three years, prices from CMAN show. "We have to wait and see how it develops".

Mubadala, which now owns IPIC, had issued a separate statement on Tuesday giving 1MDB and the Malaysian finance ministry (MoF) five days to resolve the non-payment.

"Regarding 1MDB (and its failure to repay International Petroleum Investment Company, or IPIC), we have released a statement that it was due merely to a technical issue, and not because we are not able to pay back".

IPIC was merged with Mubadala earlier this year.

"That said, failure to reach a settlement between 1MDB and IPIC would increase the possibility of these contingent liabilities crystalizing on the Malaysia government's balance-sheet".

Malaysia dissolved 1MDB's advisory board a year ago, and its assets were either shifted to the government or sold off as part of the rationalization program, after the fund was linked to a multi-billion dollar global money laundering scandal.

1MDB has skipped out on a multi-million payment to Abu Dhabi's authorities, escalating an ongoing dispute over the scandal-engulfed Malaysian state fund.

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