ICBC contributes to RM 3 billion syndicated overseas investment loan to facilitate acquisition of 60% equity stake in Bandar Malaysia and finance related project costs (Linked to Record ID#70527, #100778 and #100779)

Project narrative

In June 2015, TRX City Sdn Bhd (TRXC)— a wholly owned subsidiary of Malaysia’s Ministry of Finance — launched an international request for proposals (RP) to source investors for the Bandar Malaysia Development Project. IWH-CREC Sdn Bhd (ICSB) — a special purpose vehicle and joint venture of Iskandar Waterfront Holdings Sdn BHd (IWH) [60% ownership stake] and China Railway Engineering Corp (M) Sdn Bhd (CREC) [40% ownership stake] — was the winning bidder. On December 31, 2015, 1MDB — a Malaysia state investment fund — signed a Sale and Purchase Agreement with ICSB for the sale of 60% equity in Bandar Malaysia Sdn. Bhd. (BMSB). As part of this agreement, ICSB paid a 10% (RM 741 million) deposit, which was channelled to 1MDB (the parent company of TRXC at the time) to help it meet its outstanding debt obligations. ICSB valued 100% of Bandar Malaysia's land at RM 12.35 billion, and by extension, 60% of its land at RM 7.41 billion. Then, on June 16, 2016, Bank of China (BOC), Industrial and Commercial Bank of China (ICBC), and China Construction Bank (CCB) signed a Memorandum of Understanding (MOU) expressing their intent in providing a loan to ICSB for the Bandar Malaysia Development Project. During the same month, BOC, ICBC, and CCB signed a syndicated overseas investment loan agreement with ICSB worth RM 3 billion to facilitate its acquisition of a 60% equity stake in BMSB and finance associated project costs. The loan carried a 5-year maturity, but its interest rate and grace period are unknown. ICBC served as the mandated lead arranger of the syndicated loan. On June 16, 2016, CREC also agreed to make a $2 billion investment in ICSB (captured via Record ID#70527). However, on May 3, 2017, TRXC notified ICSB that it had failed to meet the requirements of the agreement reached on December 31, 2015 and the acquisition was being terminated. TRXC refunded the RM 741 million deposit. Malaysia’s Ministry of Finance had to step in to advance the amount to TRXC as the funds were earlier used to pay 1MDB obligations. Then, in June 2017, Malaysia’s Ministry of Finance issued a Request For Proposal (RFP) for Fortune 500 companies or international real estate companies to take on the role of master developer of the Bandar Malaysia Development Project. However, a qualified company was not identified. Then, on April 25, 2019, during the second “Belt and Road” International Cooperation Summit Forum, witnessed by the prime ministers of China and Malaysia, CREC President Zhang Zongyan and Malaysian Minister of Economic Affairs Azmin Azmin signed a framework agreement for the ‘restoration’ of the Bandar Malaysia Development Project. Two days later, on April 27, 2019, CREC announced that it would resume its participation in the acquisition of the Bandar Malaysia Development Project and maintain the original purchase price and shareholding structure. Then, on December 17, 2019, TRXC sold a 60% equity stake in BMSB to ICSB for RM 7.41 billion after the parties inked a restated shared and amended share sale agreement and shareholder agreement. The purpose of the Bandar Malaysia project is to construct 10,000 affordable housing units on a 486-acre site and an 85-acre park for the public. The project site is located in the the heart of Kuala Lumpur at the site of Royal Malaysian Air Force base on Jalan Sg Besi. The project officially commenced on April 1, 2017. Project implementation was delayed in May 2017 due to a contractual dispute. The project was restarted in April 2019. On May 6, 2021, IWH-CREC and Malaysia's Ministry of finance jointly agreed to terminate their contract due to an inability to agree on preceding conditions for the project. The project is expected to continue but not with CREC-funding. Record ID#66656 captures the estimated financial commitment of ICBC; Record ID#100778 captures the estimated financial commitment of Bank of China; and Record ID#100779 captures the estimated financial commitment of China Construction Bank.