21 April 2016
US$ 1.0 billion 3.179% Trust Certificates due 2026
US$ 0.5 billion 4.080% Trust Certificates due 2046
On 20 April 2016, the Government of Malaysia (“GOM”) via a special purpose entity, Malaysia Sukuk Global Berhad, successfully priced its 10-year and 30-year benchmark Global Trust Certificates (the “Wakala Global Sukuk”) at 3.179% and 4.080% respectively. The deal was oversubscribed by 4.2 times, attracting an aggregate interest of over US$6.3 billion from a combined investor base of over 195 accounts.
This offering marks the GOM’s fifth USD-denominated global Sukuk issuance, following the GOM’s successful global Sukuk issuances in 2002, 2010, 2011 and 2015. Proceeds from this offering will be used by the GOM for Shariah compliant general purposes, specifically for the redemption of Wakala Global Sukuk Berhad’s US$1.2 billion Trust Certificates due in July 2016 as well as to finance development expenditures.
The Global Sukuk offering was structured under the Shariah principle of Wakala. The underlying assets for the offering comprise 100% non-physical assets, namely, vouchers representing entitlement to a specified number of travel units and Shariah compliant shares. This unique combination of underlying assets represents a major breakthrough in sovereign Sukuk, being the first time a sovereign has accessed the global Sukuk market without utilizing physical assets (such as land and buildings) or Commodity Murabaha. This innovative Sukuk structure not only paves the way for other sovereigns to follow suit but also further affirms Malaysia’s position as the leader in international Islamic finance.
Post a roadshow covering Asia, the Middle East, Europe and the US, the deal attracted interest from a diverse group of domestic and international investors. The allocation was well-spread globally, with 65% of the principal amount of the 10-year Sukuk distributed to Asia, 19% to Middle-East, 11% to Europe, and 5% to the United States, whilst 54% of the principal amount of the 30-year Sukuk was distributed to Asia, 12% to Europe, 24% to the United States, and 10% to the Middle-East.
The initial price guidance on the 10-year and 30-year was 150 bps and 165 bps, respectively. This was tightened over the course of the execution to price at 135 bps and 145 bps respectively, representing a flat to minimal new issue premium versus the current GOM sovereign yield curve.
According to Tan Sri Dr. Mohd Irwan Serigar Bin Abdullah, the Secretary General of Treasury, Ministry of Finance, who led the roadshow, “We are honoured to introduce this innovative Sukuk in line with the national aspiration to foster further development of Islamic financial market. We are pleased with the investors' response and confidence in Malaysia's credit standing. The investors appreciate that notwithstanding the challenging external factors, Malaysia remains among the faster-growing economies in the region, and continues to successfully pursue fiscal consolidation while maintaining monetary and financial stability. This is a remarkable achievement as demonstrated by the tight pricing and excellent response on this landmark Sukuk”.
The Sukuk are expected to be assigned ratings of A- by Fitch Ratings Ltd. and Standard and Poor’s Ratings Services (a division of The McGraw-Hill Companies, Inc.) and A3 by Moody’s Investors Services Limited. The deal was priced after a roadshow across global financial centres, including Kuala Lumpur, Hong Kong, Singapore, Abu Dhabi, Dubai, London and New York. CIMB, HSBC, J.P. Morgan and Maybank acted as the Joint Bookrunners and Joint Lead Managers on this offering.
Ministry of Finance
21 April 2016