PLUS Berhad’s record RM23.4 billion (US$7.3 billion) Islamic bond sale is attracting life insurers with higher-than-average yields and maturities of as much as 25 years.
The Malaysian company is taking over the nation’s biggest toll-road operator PLUS Expressways Bhd in the first leveraged buyout using syariah-compliant bonds. PLUS offered RM11.3 billion of sukuk at a maximum yield of 5.07 per cent for a bond due in as long as 19 years, compared with average yields on global Islamic notes of 4.1 per cent. A portion of the total issue will be privately placed, at tenors of 20 to 25 years, according to the underwriters.
Companies in Malaysia have issued RM44.2 billion of sukuk this year, with almost 80 per cent due in less than 10 years, according to data compiled by Bloomberg. Sales of longer- dated debt may help set a benchmark for companies seeking funding for road and rail projects as part of the government’s US$444 billion development plan for the next decade.
“It’s rare to see an AAA-rated company issuing Islamic bonds with such long maturities,” Michael Chang, who oversees US$1 billion as head of fixed income at MCIS Zurich Insurance Bhd in Kuala Lumpur, the local unit of Zurich Financial Services AG, Switzerland’s largest insurer, said in an interview yesterday.
“PLUS sukuk will be in demand among insurers, both Islamic and non-Islamic. It will also help deepen the Islamic bond market.”
PLUS was set up by Malaysia’s biggest pension fund, the Employee Provident Fund, and government-owned UEM Group Bhd. to take over the highway assets of PLUS Expressways following their RM23 billion acquisition of the company. In a leveraged buyout, the buyer borrows money to purchase a controlling interest in a company and usually uses the acquired assets as security for the loans or bonds.
Izzaddin Idris, chief executive officer of UEM, couldn’t be reached for comment yesterday when phoned by Bloomberg. The head of corporate communications at the company didn’t reply to an e- mail with questions.
PLUS is offering RM11.3 billion of sukuk maturing in five to 19 years. Orders close tomorrow and the bonds are expected to be issued on Jan 13, according to a sales advisory sent to investors on Dec 14. Malaysia’s CIMB Group Holdings Bhd, AMMB Holdings Bhd, Malayan Banking Bhd and RHB Capital Bhd are lead-managing the sale.
Malaysia’s five-year ringgit-denominated Islamic bonds yielded 3.37 per cent yesterday, the lowest level since Oct 18, 2010, according to data compiled by Bank Negara Malaysia. Ten- year notes yield 3.81 per cent. The Bloomberg-AIBIM-Bursa Malaysia Sovereign syariah Index, which tracks the most-traded local-currency debt, was little changed at 105.4510 yesterday. The gauge has climbed 4.3 per cent this year.
State-controlled power producer Tenaga Nasional Bhd sold RM4.85 billion of 20-year Islamic bonds at a yield of 4.9 per cent in October and attracted bids for 4.7 times the amount on offer. The PLUS sukuk surpasses the previous Malaysian record of RM12 billion sold by telecommunications company Binariang GSM Sdn in 2007.
There are still funds in the market looking to invest in sukuk even after new issues rose to an all-time high this year, according to Mohd Noor Hj A Rahman, chief executive officer at OSK-UOB Islamic Fund Management Bhd in Kuala Lumpur.
Sales of local-currency Islamic bonds in the Southeast Asian nation, the world’s biggest market for the debt, climbed 81 per cent in 2011, from RM24.4 billion in the same period of 2010, according to data compiled by Bloomberg. Global offerings of sukuk, which pay returns on assets to comply with Islam’s ban on interest, jumped 68 percent to US$26.3 billion, compared with US$15.7 billion in the year-earlier period.
“Demand for PLUS will be strong as there’s still plenty of liquidity in the market,” Mohd Noor said in an interview yesterday. “We’d be interested as there aren’t enough sukuk.”
Investors in Asia and the Middle East will be attracted to the PLUS sukuk because of its top credit rating and the potential for currency appreciation next year, according to Malek Khodr Temsah at Albaraka Banking Group BSC in Bahrain. PLUS Expressways is rated AAA by RAM Ratings Services Bhd, their highest investment grade, while Malaysian Rating Corp has assigned a preliminary AAA rating to PLUS Bhd.
“It makes for quite a compelling investment opportunity,” Temsah, assistant vice president of treasury and investment at the Manama-based bank, said by e-mail yesterday. “The hunt for yield will continue to be one of the dominant themes of global capital flows in 2012, despite the heightened risk aversion and this will bode well for state-backed corporate issuers out of Asia.”
Albaraka’s Temsah said his bank is only allowed to invest in dollar-denominated Islamic bonds given the risk-averse mandate of the company. The lender will be looking to adjust these “parameters” in 2012, he said.
Syariah-compliant bonds gained 6.6 per cent this year, according to the HSBC/NASDAQ Dubai US Dollar Sukuk Index, while debt in developing markets rose 6.8 per cent, JPMorgan Chase & Co’s EMBI Global Composite Index shows.
“The yield for the PLUS sukuk is quite attractive compared with Islamic government bonds,” Calbert Loh, head of treasury at Kuala Lumpur-based Bangkok Bank Bhd, who helps manage RM2 billion, said in an interview yesterday. “Insurance companies would love to buy the longer-dated paper for returns on their life insurance policies.” -- (Bloomberg/15-Dec-2011)
-----
No comments:
Post a Comment