'Unsubstantiated' comment to link us with government's CDC, says 1MDB

"It is important to highlight that CDS are a derivative financial instruments, whose values are determined by traders, through demand and supply, and do not necessarily reflect economic facts or fundamentals," it said in a statement here.

In this regard, 1MDB said a CDS spread was a very different indicator to Malaysia’s 'A-/A3' credit rating, which reflected the strong ability of the government to service its debt obligations with a low probability of default.

The statement was issued by 1MDB following the comment by Penang Chief Minister, Lim Guan Eng, linking 1MDB to widening spreads on the government's CDS.

1MDB described Lim's comment as "unsubstantiated".

The state fund company said it was a fact the 1MDB rationalisation was being implemented as planned.

The fundamentals of the plan involved, among others, a 'debt for asset swap' with Abu Dhabi's International Petroleum Investment Co, a sale of equity in Edra Energy and in Bandar Malaysia, a sale of master-planned land in Tun Razak Exchange (TRX) as well as disposal of non-core assets.

1MDB said the combined proceeds from the rationalisation plan would substantially reduce its debt to a sustainable and manageable level by the fourth quarter 2015. 1MDB particularly highlighted a few key facts and fundamentals related to the progress of the rationalisation.

Among others, it has sold over RM1 billion of land in TRX this year.

1MDB said the final binding bids would be received from domestic and international shortlisted bidders for both Edra Energy and Bandar Malaysia between mid-end October 2015, with sale and purchase agreements for both assets being executed by December 2015.

1MDB said it has consistently met, with no default, its interest service and principal repayment obligations, to both foreign and domestic lenders.

It noted that the government has guaranteed RM5.8 billion of 1MDB debt (of which RM5 billion was due only in 2039) and provided a letter of support for a US$3 billion bond issued by 1MDB which would be due only in 2023.

At the current exchange rates, the principal amount of this long-term debt was about RM18.7 billion, it said.

1MDB said per statistics on the website of Bank Negara Malaysia, this equated to circa 1.7 per cent of Malaysia’s 2014 gross domestic product of about RM1.1 trillion and circa 2.9 per cent of central government's second quarter 2015 debt of about RM628 billion.