1MDB is expected to ink an agreement with Abu Dhabi's International Petroleum Investment Co (IPIC) to settle a dispute involving billions of dollars, a report said.

However, The Straits Times argued that the settlement could weaken the US Department of Justice's (DOJ) legal suits involving 1MDB.

In its report, the Singapore daily cited sources as saying the agreement would see 1MDB pay IPIC US$1.2 billion by year end, to settle a loan and accumulated interest from a bailout the IPIC gave 1MDB in July 2015.

It said most of the money would come from the sale of "fund units" from 1MDB subsidiary Brazen Sky to an undisclosed buyer.

Brazen Sky is of particular interest to 1MDB watchers because its account in Singapore's BSI Bank was supposed to be the account used to receive funds from 1MDB's Cayman Islands account.

The Cayman Islands account itself was supposed to have contained funds redeemed from 1MDB's botched joint-venture with PetroSaudi International, which dates back to 2009.

Besides the US$1.2 billion payoff, the report states that the agreement also calls for 1MDB and IPIC to settle a further US$3.5 billion by the year 2020.

This is over 1MDB bonds that IPIC had helped to raise in 2012.

Malaysiakini has reached out to 1MDB chief executive Arul Kanda Kandasamy for confirmation regarding the settlement.

Finance Minister II Johari Abdul Ghani, when contacted, said he was not privy to the negotiations.

"It's being done by the board of management of 1MDB and officers from the Prime Minister's Office," Johari told Malaysiakini.

The minister, who is currently in Washington for a World Bank and IMF conference, said he is supportive of a settlement and hoped it would benefit both 1MDB and IPIC.

Citing banking and legal experts, The Straits Times said the settlement could hamper the DOJ's 1MDB suits as there would be a lack of evidence.

Malaysiakini could not independently verify the claims made in the report.