KUALA LUMPUR: Lembaga Tabung Haji said it invested RM920.8 million in 1Malaysia Development Bhd’s (1MDB) Bandar Malaysia sukuk issuance in February last year because “it is a secured investment” on which it expects to earn RM626.5 million in profit.

In a statement yesterday, the chief investment officer of the pilgrims’ fund Abd Kadir Sahlan said the sukuk is secured against parcels of land in Bandar Malaysia, with a security cover of at least 1.67 times.  

“The sukuk was issued to finance the construction of replacement facilities in relation to the relocation of the existing Sg Besi Air Force Base facilities,” he said.

He said Tabung Haji’s total investment was in two tranches, which will generate a yield of 5.85% and 6.05% for seven and 10 years, respectively.

“At the end of the investment periods, Tabung Haji will receive total proceeds of RM1.55 billion, resulting in a RM626.5 million profit,” he said.

His clarification came after PAS asked Putrajaya to explain whether Tabung Haji had bought RM1.6 billion of sukuk issued by 1MDB’s Bandar Malaysia, before the pilgrims’ fund’s controversial purchase of a plot of land at the strategic investment company’s development the Tun Razak Exchange (TRX) in the capital.

On Sunday, PAS vice-president Datuk Tuan Ibrahim Tuan Man said, according to leaked documents posted on anonymous blog “The Benchmark” about Tabung Haji’s land purchase in the TRX from 1MDB, the risk element of Tabung Haji’s sukuk investment in Bandar Malaysia amounted to RM1.6 billion.

Tuan Ibrahim questioned if this meant Tabung Haji had invested a total of RM1.6 billion in 1MDB before the land purchase, adding that the document showed 1MDB had announced the sale of RM2.4 billion in Bandar Malaysia sukuk on Feb 18 last year.

He further asked if this meant Tabung Haji had funded 66% of the sukuk issuance. 

The pilgrims’ fund confirmed last Thursday its purchase of a 0.63ha plot of TRX land from 1MDB for RM188.5 million, a move which critics said was to inject cash into the debt-stricken company owned by the Finance Ministry. 

The deal sparked a public uproar, which subsequently led to Tabung Haji’s announcement on Saturday that the land will be sold soon.

This article first appeared in The Edge Financial Daily, on May 12, 2015.