×

Malaysia's 1MDB to sell property project stake for $1.7B

Charles Pertwee | Bloomberg | Getty Images

Malaysia's troubled state fund 1MDB said on Thursday it had agreed to a $1.7 billion property deal with a Malaysian-Chinese group, wrapping up major asset sales to cut debt.

This will help Prime Minister Najib Razak, who chairs 1MDB's advisory board and who has faced calls to resign amid international probes and public outrage over allegations of graft and financial mismanagement at the fund.

1MDB will sell its 60 percent stake in Bandar Malaysia Berhad to Iskandar Waterfront Holdings and its partner, state-run China Railway Engineering Corp,for 7.41 billion ringgit ($1.7 billion), the fund said in a statement.

Bandar Malaysia is developing a 486-acre air force base in Kuala Lumpur into the capital's public transport hub.

The deal represents the second major asset purchase from the fund involving Chinese state-run companies. China General Nuclear Power Corporation bought 1MDB's energy assets for $2.3 billion last month.

Malaysia's Iskandar Waterfront Holdings will hold 60 percent of the venture buying the 1MDB stake, while China Railway Engineering will hold the rest, 1MDB said, adding that the sale should be completed by the end of June 2016.

The multi-billion dollar purchases are expected to boost Beijing's chances of securing contracts to build other major projects in the country as China seeks to extend its influence in Southeast Asia.

China Railway Engineering is now likely to be in pole position for work on a high-speed rail link from Kuala Lumpur to Singapore that terminates in Bandar Malaysia. Japanese firms are also competing for that deal.

The stakes have been high for Najib to make progress in resolving the 1MDB scandal after the Wall Street Journal reported in July that investigators looking into the fund had found nearly $700 million was deposited into Najib's private bank account. Reuters has not verified the report.

Najib has denied taking any money for personal gain.