Khazanah issues US$750m sukuk to refinance guarantee notes

Khazanah Nasional Bhd has priced a five-year US$750 million (about RM3.15 billion) US dollar-denominated straight sukuk to refinance Penerbangan Malaysia Bhd’s guaranteed notes at lower cost.

The US$ sukuk was priced at a profit rate of 3.035 percent following an accelerated bookbuilding process which attracted demand of 1.5 times booksize from financial institutions, asset management companies, statutory bodies and insurance companies.

Despite challenging market conditions, Khazanah achieved its target issue size at a spread of 178 basis points above prevailing five-year US Treasuries, it said in a statement.

This will be Khazanah’s first US$ straight sukuk issuance, done via Malaysian-incorporated special purpose vehicle Danga Capital Bhd.

“Proceeds of the US$ sukuk will be utilised to refinance Penerbangan Malaysia Bhd’s US$1 billion guaranteed notes maturing this year,” it added.

Capitalising on low US Treasury yields, Khazanah was able to refinance these notes which were guaranteed by the government at a savings of 2.590 percent perannum against the current 5.625 percent coupon while simultaneously reducing the Malaysian Government’s contingent liability.

“The US$ sukuk issuance demonstrates Khazanah’s ability to access the debt capital markets and achieve a competitive spread against a backdrop of market volatility.

“This issuance is another milestone for Khazanah, which has consistently closed innovative and landmark transactions,” said its chief financial officer, Mohd Izani Ghani.

The US$ sukuk, which is structured under the Shariah principle of Wakalah1 utilising Shariah-compliant shares and Shariah-compliant commodities, will be listed on Bursa Malaysia Securities Bhd (under an Exempt Regime), Labuan International Financial Exchange Inc and the Singapore Exchange Securities Trading Ltd.

- Bernama