By Tony Pua, Petaling Jaya Utara MP

When an UMNO leader files a police report alleging gross mismanagement in a company owned and supported by the Government, where Najib Razak sits as the chairman of the Board of Advisors as its sponsor, the complainant has either the testicular fortitude for a “death” wish or he has in his possession knowledge of the deepening 1MDB RM42 billion debt crisis.

What’s more, it reeks too much of a coincidence that the 1MDB scandal was also raised as a matter of concern in the Cabinet meeting this week. The meeting was chaired by the Deputy Prime Minister, Tan Sri Muhyiddin Yassin while Dato’ Seri Najib was away overseas, as reported by The Malaysian Insider.

1MDB has, not for the first time, missed the deadline to repay an outstanding debt. On 30 November 2014, 1MDB was due to repay a RM2 billion debt but has failed to do so to date. Instead, it has asked for an further extension from the financiers.

Prior to this, the March 2014 1MDB financial statements had revealed that 1MDB was forced to extend for 6 months a syndicated bridging loan amounting to RM6.17 billion when it was due on 22 November 2013.

When the sum became due again in May 2014, the loan was extended again. 1MDB was only able to repay RM670 million in August 2014. The company had to restructure the balance of the loan into a RM2 billion short-term loan and a RM3.5 billion 10-year bond. The Singapore Business Times had reported that 1MDB’s debt rescheduling came at an expensive price of 2.5 per cent interest above the annualised cost of funds, on top of the RM20 million to RM30 million in upfront fees.

It is this RM2 billion which is now due and 1MDB is once again forced to request for an extension. The financiers, Maybank Investment Bank Bhd and RHB Investment Bank would have not choice but to accede to the request. This is because an official default on the RM2 billion loan will not only cause 1MDB to automatically default on the balance RM42 billion debt, but also likely cause a collapse to the Malaysian domestic banking system.

1MDB has been unable to repay its debt despite the fact that it has recently secured another 1-year US$975 million (RM3.4 billion) loan from Deutsche Bank AG in September 2014. This is a clear indication that 1MDB’s debt is rising far faster than it is able to service and repay them.

Worse, because 1MDB is practically insolvent without the injection of new funds, it is now unable to execute the multi-billion ringgit projects it has secured from the Government.

The Government had controversially awarded an RM11 billion coal-fired power plant in Negeri Sembilan despite 1MDB not having submitted the lowest bid in February 2014. However, the project construction is now behind schedule because 1MDB has failed to raise the necessary funds to commence its work.

1MDB had planned to fund the project via a RM8.4 billion sukuk to be issued in November. Reuters has since reported two days ago that 1MDB has postponed the fund-raising exercise to 2015 and will be seeking an extension for construction of the power plant project from the Government.

The postponement of the sukuk exercise can only be attributed to 1MDB’s inability to raise further debt as a result of the company’s risk status due to the monster RM42 billion and rising debt.

Despite the Prime Minister’s hollow assurance that 1MDB is “financially strong”, the factual evidence presents a dire and desperate picture for the massively indebted company. And despite our reservations, we hope that the Royal Malaysian Police will conduct its commercial crimes probe into 1MDB without fear or favour to ensure that those responsible for the gargantuan scandal will be brought to book. The Police must act fast before 1MDB escalates into Malaysia’s own achilles heel, bringing the already fragile economy down crashing violently.