Malaysian Flagship Bank Islam Issues Second Tranche RM400m Murabaha Sukuk under its RM10bn Issuance Programme  

Kuala Lumpur – BIMB Holdings Bhd, through its wholly-owned subsidiary Bank Islam Malaysia Bhd, Malaysia’s flagship and oldest Islamic bank, following approvals from Bank Negara Malaysia (BNM), the central bank, and the Securities Commission Malaysia (SC), issued a RM400 million Subordinated Sukuk Murabahah in Nominal Value on 26 March 2020.

The Sukuk was issued under BIMB Holdings’ RM10 billion Sukuk Murabahah Programme and is the second Sukuk offering to be issued under the Programme. The first tranche – a RM300 million Sukuk – was issued in November 2017.

In a disclosure to Bursa Malaysia, the national stock exchange, BIMB said the Sukuk has a tenure of a 10-years, which is non-callable for five years with a maturity date of 26 March 2030. The Sukuk certificates have been assigned an A1 (stable) rating by the local by RAM Rating Services Bhd.

BIMB stressed that the proceeds shall be utilised to finance Bank Islam’s Islamic banking activities, working capital requirements and other corporate purposes, and if necessary to redeem any outstanding from previous Sukuk issuances by the bank.

Under the Programme, Bank Islam is given the flexibility to issue Subordinated Sukuk Murabahah and/or Senior Sukuk Murabahah during the designated availability period, with a tenure of up to 30 years from the date of the first issuance of the subordinated Sukuk Murabahah and/or Senior Sukuk Murabahah.

RAM Rating Services Berhad has reaffirmed a final long-term rating of ‘A1/stable’ and ‘AA3/stable’ to the Subordinated Sukuk Murabahah and Senior Sukuk Murabahah respectively under the Sukuk Murabahah Programme.

“The Subordinated Sukuk Murabahah issued under the Subordinated Sukuk Murabahah Programme shall qualify as Tier 2 regulatory capital of Bank Islam in compliance with Bank Negara Malaysia’s Capital Adequacy Framework for Islamic Banks (Capital Components). Hence, it will enhance the capital adequacy of the bank in line with the requirements under Basel III,” added Bank Islam in a statement.

The updated Sukuk Murabahah Programme was lodged with the Securities Commission Malaysia on 6 September 2018. Bank Islam was also the Principal Adviser, Lead Arranger, Lead Manager and Shariah Adviser for the Programme.

Malaysian Mortgage Securitisation Entity, Cagamas, Raises RM1bn in Hybrid Sukuk/Bond Offering in April 2020

Kuala Lumpur – Cagamas Berhad, the National Mortgage Corporation of Malaysia, one of the most prolific issuers of Sukuk, closed its latest offering in April with a RM1 billion combined issuance comprising a RM500 million 2-year Conventional Medium Term Notes (CMTNs), RM300 million 6-month Islamic Commercial Papers (ICPs) and RM200 million 3-month Conventional Commercial Papers (CCPs).

The proceeds from the issuances, according to the Corporation, which continues to play a major role in the Islamic mortgage securitization market in Malaysia, will be used to fund the purchase of housing loans and Islamic home financing from the domestic financial system.

“The transactions marked the Company’s fifth issuance exercise for the year and brings the year-to-date (YTD) issuance amount to RM2.605 billion. With these transactions, the Company has concluded a total of RM1.8 billion issuances within a month. This signals continued support from investors and demonstrates the strength and depth of the Company’s investor base in these challenging market conditions,” said Cagamas President/Chief Executive Officer, Datuk Chung Chee Leong.

“Despite the cautious market outlook during this period with demand predominantly centred on Government papers, the Company had strategised and opted for a public book building exercise for its CMTNs issuance to entice wider participation from investors. The issuance received overwhelming response with an initial book-to-cover (BTC) ratio of 2.8 times, resulting in the Company to upsize its issue size from the initial RM300 million to a final RM500 million. The Company was also able to tighten the yield from an initial price guidance of 3.15% to the final 3.10% with a final BTC of 1.7 times. Both the ICPs and CCPs were concluded on a private placement basis,” added Datuk Chung.

Cagamas was established in 1986 to promote the broader spread of home ownership and growth of the secondary mortgage market in Malaysia. It issues corporate bonds and Sukuk to finance the purchase of housing loans from financial institutions and non-financial institutions. The provision of liquidity to financial institutions at a reasonable cost to the primary lenders of housing loans, maintains the Corporation, encourages further expansion of financing for houses at an affordable cost.

“Market uncertainties amidst a challenging global economy and slower momentum in domestic activities, exacerbated by the recent Covid-19 virus outbreak saw investors shifting investments into haven assets. Expectations of monetary policy easing by the market coupled with the pending announcement of economic stimulus package by the Government also provided support for the Company’s fund-raising exercise”, said Cagamas President/Chief Executive Officer, Datuk Chung Chee Leong.

All the above issuance proceeds will be used to fund the purchase of mortgage loans and Islamic house financings from the financial system. The papers, which will be redeemed at their full nominal value upon maturity, are unsecured obligations of the Company, ranking pari passu among themselves and with all other existing unsecured obligations of the Company. They will be listed and tradable under the Scripless Securities Trading System of Bursa Malaysia.

Cagamas’ corporate bonds and Sukuk continue to be assigned the highest ratings of AAA and P1 by RAM Rating Services Berhad and AAA/AAAIS and MARC-1/MARC-1IS by Malaysian Rating Corporation Berhad, denoting its strong credit quality.  Cagamas is also well regarded internationally and has been assigned local and foreign currency long-term issuer ratings of A3 by Moody’s Investors Service Inc. that are in line with Malaysian sovereign ratings.

The Cagamas model is regarded by the World Bank as the most successful secondary mortgage liquidity facility. Cagamas is the second largest issuer of debt instruments after the Government of Malaysia and the largest issuer of AAA corporate bonds and Sukuk in the market. Since incorporation in 1986, Cagamas has cumulatively issued circa RM328.7 billion worth of corporate bonds and Sukuk.

Albaraka Turk Raises TL580 million Through Three Sukuk Ijara Offerings in February 2020 

Istanbul – Leading Turkish Participation bank, Albaraka Turk Katilim Bankasi, a subsidiary of the Bahrain-incorporated but Saudi-owned Albaraka Banking Group, raised TL415 million through two Ijara (Lease Certificate) Sukuk issuances in March 2020. The issuances comprised a TL325 million issuance on 25 March 2020 with a maturity of 58 days; and a TL90 million issuance on 16 March 2020 with a maturity of 65 days.

The Sukuk were issued through Bereket Varlik Kiralama, a locally incorporated special purpose company, on behalf of the obligor, Albaraka Turk Katilim Bankasi.

Albaraka Turk executes regular Turkish Lira Lease Certificate Issuances in the domestic market. “With the help of these issuances, we aim to contribute to the development of Islamic Capital Market in Turkey as well as enhance our investor base,” said Malek K. Temsah, Albaraka Turk’s Assistant General Manager of Treasury, Investment Banking, and Financial Institutions.

Strong Demand Marks IILM’s March and April Auctions of Short-term Sukuk totaling US$1.86bn Amid COVID-19 Uncertainties and Low Oil Price Volatility 

Kuala Lumpur – The International Islamic Liquidity Management Corporation (IILM) concluded its two auctions – one on 11 March 2020 by issuing a total amount of US$800 million short-term A-1 rated Sukuk in three series; and another on 8 April 2020 amidst the challenging global market conditions by issuing three short-term A-1 rated Sukuk for a total amount of USD1.06 billion.

In the March auction, its third auction of the year, IILM issued a total amount of US$800 million short-term A-1 rated Sukuk in three series. These comprised; i) A  US$300 million Sukuk of 1-month tenor at priced at a profit rate of 0.81%; ii) A US$300 million Sukuk of 3-month tenor priced at a profit rate of 0.87%; and iii) A US$200 million Sukuk of 6-month tenor priced at a profit rate of 0.85%, respectively. The cut-off profit rates across all the Sukuk issuances, said IILM, came up far below February 2020 levels by at least 90 basis points reflecting the massive decline of the global money-market rates.

Strong global investor demand, added IILM, led to a total order book of US$1.47 billion and a bid-to-cover ratio for the three Sukuk series of 190%. With over 50 orders from diversified investors, the allocations across all tenors are concentrated within the GCC region accounting to circa 90% in average.

“The successful auction, which is part of the IILM’s scheduled issuance calendar,” maintained the Corporation, “comes at a moment of significant market volatility. The excellent outcome amid global uncertainties is a testament to the strength of the IILM’s credit quality. The enduring confidence from the Primary Dealers and investors’ in the IILM enables it to fulfill its specific mandate to provide the global market with high quality Sharia’a-compliant liquidity instruments.” The March IILM auction completes the First Quarter 2020 issuances with a total of 9 securities amounting to US$2.65 billion and representing close to 30% of all the US$ Sukuk issued globally year-to-date.

In April, the IILM successfully conducted its auction amidst the challenging global market conditions by issuing three short-term A-1 rated Sukuk for a total amount of US$1.06 billion. The auction, stressed the Corporation, drew more than US$1.85 billion in demand with an average bid-to-cover ratio for the three tranches of 175% – an increase of 16% of the order book since last month’s issuances. With over 60 orders from diversified investors, the Islamic Primary Dealers got allocations across all tenors of up to 90% of the total issuances.

In the April auction, its fourth auction of the year, IILM issued a total amount of US$1.06 billion short-term A-1 rated Sukuk in three series. These comprised; i) a US$300 million Sukuk of 1-month tenor at priced at a profit rate of 1.15%; ii) a US$460 million Sukuk of 3-month tenor priced at a profit rate of 1.55%; and iii) a US$300 million Sukuk of 6-month tenor priced at a profit rate of 1.73%, respectively.

Initial mid-pricing guidance, according to the IILM, was 7 basis points higher for the 6-month tranche and 10 basis points higher for the shorter tranches. “Despite the headwinds linked to the Coronavirus pandemic, the oil price slump and tightening liquidity across all the asset classes, the IILM remains committed to offer multiple short-term alternatives to provide high quality Sharia’a-compliant liquidity instruments to the market. The April auction marks a major milestone in the history of the IILM. With today’s auction, the IILM successfully crossed the 100th mark in Sukuk issued since 2013, which amounts to a cumulative issuance of over US$53 billion,” added the Corporation.

The IILM short-term Sukūk programme is rated “A-1” by S&P. The total of IILM Sukuk outstanding is USD 2.51 billion with a Sharia’a tradability ratio of 71% tangible assets.

According to the IILM, the primary dealers that participated in the three auctions conducted under the competitive bidding of the Bloomberg AUPD Platform included Abu Dhabi Islamic Bank; Al Baraka Turk Participation Bank; Barwa Bank; Boubyan Bank; CIMB Islamic Bank Berhad; First Abu Dhabi Bank; Kuwait Finance House; Macquarie Bank; Maybank Islamic Berhad; Qatar Islamic Bank; and Standard Chartered Bank. 

Malaysian Government Mandates Danajamin to Manage its RM50bn COVID-19 Economic Mitigation and Stimulus Guarantee Scheme

Cyberjaya – Danajamin Nasional Berhad, Malaysia’s state-owned Financial Guarantee Insurer for bonds and Sukuk, has been given the task by new Malaysian Prime Minister, Tan Sri Dato’ Haji Muhyiddin bin Haji Mohd Yassin, to manage the RM50 billion Guarantee Scheme announced in the Economic Stimulus Package (Prihatin) by the Prime Minister on 27 March 2020 as part of its COVID-19 Mitigation Package.

Under the package, the Government has set up an RM50 billion Guarantee Scheme to guarantee up to 80% of the working capital financing required by corporate sectors who are facing difficulties due to the Covid-19 situation, including inter alia Islamic financial institutions and Sharia’a-compliant businesses. The minimum guaranteed loan size is RM20 million per business. This facility is available for application from May 1 to December 31, 2020, or until the Scheme is fully utilised. 

Danajamin’s mandate is to ensure that financially viable corporates continue to be able to access the bond/Sukuk market for their long-term financing needs and, at the same time, be an enabler to further develop the domestic bond/Sukuk sector. To date, Danajamin’s guarantees have assisted 42 issuances across various sectors; and brought about a market impact of about RM22.7 billion through its risk sharing collaboration with partner banks.

Danajamin is ‘AAA’ rated by both RAM Rating Services and Malaysia Rating Corporation and regulated and supervised by Bank Negara Malaysia under the Financial Services Act 2013. Danajamin is owned equally by the Minister of Finance Incorporated, a subsidiary of the Malaysian Ministry of Finance, and the Credit Guarantee Corporation Malaysia. 

Wafra Invests US$100m in MENA Region’s Leading Tech-enabled Agribusiness Entity, Pure Harvest Smart Farms  

Abu Dhabi – Wafra International Investment Company, a wholly owned subsidiary of The Public Institution for Social Security, secured in April a multi-stage investment valued at over US$100 million in Pure Harvest Smart Farms, the region’s leading tech-enabled agribusiness, The deal is the largest-ever agriculture technology investment in the MENAPT region. 

The strategic investment from Wafra, which is very active in the Islamic asset management and investment space, will drive Pure Harvest Smart Farms development and deployment of advanced controlled-environment agriculture solutions across the region to sustainably grow premium quality fresh fruits and vegetables—regardless of outdoor climate conditions.

Pure Harvest designs, builds and operates high-tech, climate-controlled greenhouse systems that convert the region’s abundant natural sunlight into premium quality, pesticide-free fresh fruits and vegetables. “The global need for innovation in agriculture has never been greater.  The recent COVID-19 crisis and resulting supply chain disruptions further highlight the need for sustainable local-for-local food production capacity, especially for fresh, nutrient-rich foods.  This visionary multi-phase investment commitment from Wafra has given us the resources needed to secure our foothold as a pioneer in controlled-environment agriculture in the Middle East,” said Sky Kurtz, founder & CEO, Pure Harvest Smart Farms.

According to Ghazi Al-Hajeri, CEO of Wafra International Investment Company, “Wafra’s investment into Pure Harvest acknowledges the significant potential of controlled-environment agriculture in solving the food security challenges facing the Arabian Gulf region, including Kuwait. The Arabian Gulf food system is undergoing a monumental shift toward a technology-enabled farming model in order to meet consumer demands for affordable, high quality foods. When you combine the local abundance of sunlight with energy and water-efficient climate management systems, the region makes a compelling case as one of the best places in the world for horticulture – a ‘contrarian’ thesis we believe in and that led us to invest in Pure Harvest.  We have earmarked US$100 million to support future expansions should the company continue to perform.”

BankIslami Pakistan Issues PKR2bn Ehad Mudaraba Sukuk in Support of its Additional Tier 1 Capital 

Karachi – Bank Islami Pakistan has issued a PKR2,000 million (US$12.5 million) Ehad Sukuk, which is based on a Mudaraba structure and comprises PKR1,700 million Pre-IPO Placement tranche and a PKR300 million Initial Public Offering. The issuances were open to subscription on 20 to 21 April 21, 2020.

The Sukuk Certificates, according to the prospectus, are unsecured, subordinated, rated, listed, perpetual and non-cumulative.  The Issue amount will contribute towards BankIslami’s Additional Tier 1 Capital for CAR as per guidelines set by the State Bank of Pakistan (SBP).

“The funds raised will be utilized in the Bank’s financing and investment activities (General Pool) as permitted by its Memorandum & Articles of Association. The proceeds of the Issue shall be commingled with other funds of the depositors (which may include Bank’s own equity) i.e. shall be invested in the General Pool of the Bank,” said the prospectus.

The approval in principle for the issuance by the SBP was conditional on “the Mudaraba Sukuk document (i.e. Shariah Structure / pronouncement, term sheet and all the related documents) shall include a clause pertaining to Sukuk Holders’ explicit permission to the Bank to co-mingle its funds with the Mudaraba Pool (as per SBP’s instructions for Profit & Loss Distributions and Pool Management for Islamic Banking Institutions – IBIs).”

The Sukuk Certificates of PKR1,700 million have been offered to investors through

a pre-IPO subscription (Pre-IPO Portion) and the remaining PKR 300 million have been offered to the general public through this prospectus (IPO Portion).

The Sukuk Certificates have been assigned a rating of “A-” by PACRA and carry a floating rate coupon priced at a spread of 275 basis points over 3-month KIBOR (Karachi Inter Bank Offered Rate). Profit will be payable monthly (365 days in

a year) in arrears on the outstanding investment amount. The first such profit payment will fall due at the end of 1st calendar month end from the Issue Date and subsequently every month end thereafter.

The issuance was managed by Allied Bank Limited, Askari Bank Limited, Bank Alfalah Limited, Bank Al Habib Limited, BankIslami Pakistan Limited, Habib Metropolitan Bank Limited, JS Bank Limited, MCB Bank Limited, Meezan Bank Limited, Soneri Bank Limited and United Bank Limited. JS Global Capital Limited acted as designated market maker to the transaction.

Application has been made to list the Ehad Sukuk certificates on the Pakistan Stock Exchange.

Saudi Food Producer Almarai Company Fully Redeems SR787m Sukuk at End March

Jeddah – Almarai Company, the largest integrated dairy and food producer and exporter in the Gulf Cooperation Council (GCC) region, has fully redeemed its SR787 million (US$210 million) Sukuk – Series II on 31 March 2020.

In a disclosure to Tadawul (the Saudi Stock Exchange), the company thanked its investor base, “specifically all the Sukuk holders who participated in the series, for repeatedly placing their trust in the Company, its board and its management.” 

The Sukuk was issued at par on 31 March 2013 with no discount or premium.  The company transferred both the principal and profit to the designated account and the Sukuk account holders duly received funds on 31 March 2020, transferred through the Agent and Administrator (HSBC Saudi Arabia Ltd).

Almarai Company is a frequent user of Islamic finance especially syndicated Murabaha facilities, revolving Murabaha credit facilities and regular issuer of Sukuk albeit mainly denominated in Saudi riyal.


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