SRC Trial: SRC borrowed RM4b, agreed to pay RM9.2b back to KWAP

Emmanuel Santa Maria Chin
Lawyer Mohd Suhaimi Ismail is pictured at Kuala Lumpur High Court in Kuala Lumpur, July 15, 2019. — Picture by Firdaus Latif

KUALA LUMPUR, July 15 — SRC International Sdn Bhd had agreed to pay the Retirement Fund (Incorporated) (KWAP) RM9.2 billion in return after taking out two loans totaling some RM4 billion from the fund back in 2011 and 2012.

It was revealed today in court that among the terms agreed upon by KWAP and SRC International was for each loan of RM2 billion be repaid at a price of RM4.6 billion, after taking into account a 12 per cent interest rate.

Mohd Suhaimi Ismail, 56, the prosecution’s 48th witness in Datuk Seri Najib Razak’s RM42 million SRC International trial, told Deputy Public Prosecutor Muhammad Saifuddin Hashim Musaimi today that the terms of the loan between the two entities were done by way of a Shariah-compliant repayment method.

Muhammad Saifuddin: SRC has to pay back the facility; meaning they have to pay all RM4 billion according to the facility agreement?

Mohd Suhaimi: They have to pay RM4.6 (billion) for the first and second (loans).

Muhammad Saifuddin: And this includes the facility?

Mohd Suhaimi: And the profit rate.

Muhammad Saifuddin: SRC has to pay the full RM4.6 billion for the first and second (loans).

Mohd Suhaimi: Yes, correct.

Muhammad Saifuddin: For the RM4.6 billion to pay back that’s from the first RM2 billion, and another RM4.6 billion is the second facility amount of RM2 billion?

Mohd Suhaimi: Correct.

Muhammad Saifuddin: So, meaning to say the total they (SRC International) have to pay for both facilities is RM9.2 billion.

Mohd Suhaimi: Yes.

Mohd Suhaimi, who in 2011 and 2012 was a senior partner at the Hisham, Sobri & Kadir legal firm had handled the legal matters pertaining to SRC International’s loan from KWAP.

He explained that the loan agreement between KWAP and SRC International was done under the Shariah-compliant method using the Bai’ al-’inah facility.

He said the terms for such an agreement would see it be labeled as two different contracts as required under the Bai’ al-’inah facility, namely the sales of assets agreement and the purchase of assets agreement.

The qualified lawyer, now Director of the Legal Department at Bandar Malaysia Sdn Bhd, said for it to be Shariah-compliant, the SRC International would have to ‘buy’ the assets from KWAP in the form of the loan.

“This financing agreement is under al-‘inah, where there are two transactions where under the asset sales agreement, KWAP sold (the loan) to SRC at the rate of RM4.6 billion (each loan).

“Then, through the asset purchasing agreement, KWAP repurchased the asset as the purchase price of RM2 billion.

“Based on the sales and purchase contracts under Shariah laws, both parties must agree what and how much assets are being sold and bought,” he Muhammad Saifuddin.

A previous witness testified that SRC International outstanding debt to KWAP stood at RM4.15 billion as of May this year.

It was revealed the loan repayment period would last until 2022, 10 years from the date it was given out based on the loan agreement between KWAP and SRC International.

Najib is on trial for seven charges of abuse of position, criminal breach of trust and money-laundering over RM42 million of SRC International’s funds.

During the course of the trial, witnesses have testified that KWAP granted a total of RM4 billion in loans in August 2011 and March 2012 to SRC International, with money allegedly flowing through other companies before being transferred into Najib’s accounts.

At the time of the first loan application, SRC International was the wholly-owned subsidiary of 1Malaysia Development Berhad (1MDB) which was owned by the Finance Ministry’s Minister of Finance Inc (MoF Inc); while SRC International was parked directly under MoF Inc by the time of the second loan application.

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