(Adds comment from Iskandar Waterfront and CREC group)
KUALA LUMPUR May 3 A $1.7 billion property deal
that was expected to ease the debt burden of Malaysian state
fund 1Malaysia Development Berhad (1MDB) fell through on
Wednesday, complicating Prime Minister Najib Razak's efforts to
move on from a financial scandal surrounding the fund.
TRX City Sdn Berhad, a former 1MDB division now owned by the
Malaysian finance ministry, said the deal had lapsed to sell 60
percent of Bandar Malaysia, a major property development project
on the site of the former Sungai Besi air force base in Kuala
Lumpur, because the buyers "failed to meet the payment
In December 2015 Iskandar Waterfront Holdings, owned by
Malaysian tycoon Lim Kang Hoo, and China Railway Engineering
Corp (CREC) had said they would buy a 60 percent stake in Bandar
Malaysia from 1MDB for 7.41 billion ringgit ($1.7 billion).
The joint venture Iskandar Waterfront and CREC group, IWH
CREC Sdn Bhd, said in a statement that TRX City's termination
notice and press statement "does not fully and accurately
reflect the circumstances and conduct of the parties in this
It said the group was reviewing the contents of the notice
and statement with its advisors and legal counsel.
Prime Minister Najib had said at the time that the sale,
plus other deals, would mean 1MDB's major challenges were now
1MDB had racked up more than $11 billion in debt before
beginning a restructuring programme in 2015. The fund is also
the subject of money-laundering investigations in at least six
1MDB has denied any wrongdoing.
"TRX City will immediately be inviting expressions of
interest for the role of master developer of Bandar Malaysia,
with full ownership being preserved by the Ministry of Finance,"
the company said in a statement.
TRX City, which the finance ministry took control of last
year in the wake of the scandal, said the ministry would remain
its sole shareholder.
When the Bandar Malaysia deal was first announced 1MDB said
Iskandar Waterfront would hold 60 percent of the venture, buying
the 1MDB stake, while China Railway Engineering would hold the
The Bandar Malaysia development will include a hub for a
digital free trade zone and a terminal for the high speed rail
connecting Kuala Lumpur and Singapore.
Last week, 1MDB agreed to pay $1.2 billion to Abu Dhabi's
International Petroleum Investment Co (IPIC) to resolve a debt
dispute, a move giving a boost to Najib ahead of elections that
could be called later this year.
($1 = 4.3170 ringgit)
(Reporting by Praveen Menon and Liz Lee; Editing by Jane
Merriman, Greg Mahlich)