BY KINIBIZ
DECEMBER 16, 2015 8:00AM
1MDB has already lost some RM6 billion by mispricing its bonds. So was this deliberately done, and whose pockets ended up bursting at the seams?
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A big chunk of 1Malaysia Development Bhd’s (1MDB) fundraising over the years had been through issuing bonds. However, the company had been massively underpricing its bonds, losing some RM6 billion according to KINIBIZ estimates – and this is not paper but real, cold, hard cash.
When a bond is issued, it has a coupon rate and a face value. The coupon rate typically remains constant over the life of the bond and is a promise by the issuer to pay a certain percentage of the face value of the bond each year.
Bonds are commonly priced to give roughly similar yields as other comparable bonds in the open market. Yields are the annual coupon payments for the year divided by the price of the bond. Yields are adjusted by raising or lowering the bond price – they move in opposite directions.
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