Former 1MDB subsidiary SRC International Sdn Bhd is insolvent, forcing its current owner – the Finance Ministry – to service the repayment of a RM4 billion loan to the Retirement Fund Incorporated (Kwap), according to sources.

Kwap had disbursed the loan in two tranches – in 2011 when SRC International was a 1MDB subsidiary, and in 2012 after it was taken over by the Finance Ministry...