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Malaysia wants money back from Goldman Sachs, but won't harm investors to avert credit rating risks

Ben Paul
Ben Paul12/21/2018 04:39 PM GMT+08  • 6 min read
Malaysia wants money back from Goldman Sachs, but won't harm investors to avert credit rating risks
SINGAPORE (Dec 24): When Goldman Sachs was selling bonds issued by 1Malaysia Development Bhd (1MDB) in 2012, a fund manager friend of mine remembers its salespeople emphasising that the securities were a Malaysian “sovereign credit risk”. Yet, the cou
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SINGAPORE (Dec 24): When Goldman Sachs was selling bonds issued by 1Malaysia Development Bhd (1MDB) in 2012, a fund manager friend of mine remembers its salespeople emphasising that the securities were a Malaysian “sovereign credit risk”. Yet, the coupons on these bonds were higher than the yields on Malaysian sovereign bonds. My fund manager friend asked to see an explicit statement that the bonds were guaranteed by the Malaysian government. The Goldman Sachs salespeople never got back to him.


See: Singapore said to expand 1MDB criminal probe to include Goldman

By 2015, the 1MDB scandal was making international headlines, and Goldman Sachs was reportedly attracting law enforcement scrutiny for its role in the whole affair. In particular, the US$600 million in fees and commissions the bank earned from its 1MDB-related activities seemed to be a red flag. Goldman Sachs arranged and underwrote three bond issues for units of 1MDB in 2012 and 2013, worth a total of US$6.5 billion. The US$600 million of fees it earned was equivalent to more than 9% of the bond proceeds, which seems excessive.

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