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Malaysia’s troubled state investment fund 1MDB has agreed to make a repayment to Abu Dhabi’s state-owned International Petroleum Investment Company under a deal to settle a dispute in which the Emirati fund is claiming about $6.5bn.

Under a deal announced to the London stock exchange on Monday, Malaysia will pay the Abu Dhabi fund $1.2bn by the end of this year.

Malaysia’s ministry of finance and 1MDB will also assume coupon obligations for bonds issued by 1MDB and guaranteed by Ipic.

The dispute arose from a bailout deal in 2015 in which Ipic agreed to lend $1bn to 1MDB and assume payments on $3.5bn of the Malaysian fund’s debt.

In return, 1MDB was to transfer assets, but the Abu Dhabi fund said the Malaysian ministry of finance and the Malaysian fund had failed to perform their contractual obligations.

Allegations of money-laundering and embezzlement linked to 1MDB are being probed by regulators in the US, Singapore and Switzerland.

Copyright The Financial Times Limited 2017. All rights reserved.
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