Thursday, September 28, 2006

Malaysian government investment agency Khazanah raises US$750 million in Islamic bonds

"Malaysia's Khazanah raises US$750 million in world's first exchangeable Islamic bond", International Herald Tribune, September 28, 2006

Following the bid close yesterday, the Malaysian state-owned investment company Khazanah Nasional Bhd, has now concluded its world-first issue of RM 2.76 billion (US$750 million) Islamic exchangeable bonds. The bonds were marketed in the region as well as in the Middle East, predominately in Saudi Arabia, Qatar, UAE and Kuwait. The bonds will be convertable into shares of Khazanah-controlled Telekom Malaysia Bhd, the largest Malaysian telecoms company. As with other exchangeable bonds, holders have the option of holding the notes until maturity in 2011. Malaysia's Business Times provides more details on the bonds:
"The certificates were priced at 100 per cent of the principal amount with yield to maturity of 5.07 per cent. They will carry an annual periodic payment of 1.25 per cent and exchange premium of 19 per cent over the 1-day volume weighted average price of TM shares on September 27 2006." --"Khazanah issues world's 1st Islamic exchangeable bonds" (September 28, 2006)
One analyst speaking to the Business Times on the use of Islamic bonds rather than placement of shares indicated that the former are more easily to sell because of the large excess of demand over supply of sukuk. Currently, Khazanah owns a 40 percent stake in Telekom Malaysia; if all the bonds are exchanged, Khazanah will still be the single largest shareholder, but their shareholdings will fall to 30 percent of all shares.

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