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Malaysia’s Mortgage Securitiser Cagamas Closes Final Sukuk Issuance for 2020 Bringing Total Combined Issuances for the Year to RM11.7bn

Kuala Lumpur – Cagamas Berhad, the National Mortgage Corporation of Malaysia, one of the most prolific issuers of Sukuk, closed the year 2020 with a combined RM450 million (US$111.1 million) two-tranche Sukuk issuance on 21 December 2020.

The issuance comprised a RM50 million 2-year Islamic Medium-Term Notes (IMTNs) and RM400 million 3-month Conventional Commercial Papers (CCPs). Proceeds from the issuances will be used to fund the purchase of house financing and housing loans from the financial system.

This latest offering follows the combined 2-tranche Sukuk issuance in November totalling RM545 million, comprising RM300 million 3-month Conventional Commercial Papers (CCPs) and RM245 million 3-month Islamic Commercial Papers (ICPs).

“We are pleased to conclude the year with yet another successful issuance, representing the Company’s 22nd issuance exercise which brings the aggregate issuances for the year to RM11.7 billion. This marks the Company’s fourth consecutive year surpassing RM10 billion worth of issuances,” said Datuk Chung Chee Leong, President/Chief Executive Officer of Cagamas.

“It has been an eventful year with many unprecedented twists and turns. Economic turmoil associated with the COVID-19 pandemic has had a wide-ranging and severe impact on financial markets globally. Domestically, the Malaysian financial market remains resilient and continues to function efficiently despite the challenging global economic environment,” he added.

Cagamas, according to Datuk Chung remains vigilant during this period and will strive to navigate the impact of the pandemic through many efforts of reinvention, accelerating digital transformation and implementing various agile operating procedures to mitigate disruptions from the pandemic. “We remain committed in our continuous efforts to fulfil our mandate as a financial intermediary between the capital market and the Malaysian housing sector,” he stressed.

The IMTNs was priced at spread of 41 basis points (bps) above the corresponding Malaysia Government Investment Issues (MGII), while the CCPs were priced at the corresponding 3-month KLIBOR benchmark rate plus 2 bps or equivalent to 1.96% based on KLIBOR fixing on the pricing date, represented 26 bps above the Malaysian Treasury Bills (MTB).

Cagamas plays a major role in Sukuk origination and continues to be an innovator in the mortgage finance and securitisation market. In September for instance, Cagamas, through its subsidiary Cagamas SRP Berhad, launched the Digital Skim Rumah Pertamaku (Digital SRP), the country’s first online home financing service aimed primarily at first time home buyers. Last month, Cagamas achieved another first by successfully pricing a combined issuance of its inaugural ASEAN Sustainability SRI Sukuk and Islamic Medium-Term Notes (IMTNs) totalling RM450 million.

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 well 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 RM317.6 billion worth of corporate bonds and Sukuk.

APICORP Agrees US$125m Islamic Corporate Finance Facility for Saudi Arabia’s ACWA Power in Support of its Green Technologies Projects

Manama – APICORP, the Bahrain-based energy multilateral development financial institution, signed in early January 2021 a US$125 million 5-year Sharia’a-compliant corporate finance facility agreement with ACWA Power, a leading Saudi developer, investor and operator of power generation and desalinated water plants worldwide. The proceeds of the facility will be used to support ACWA Power’s future growth pipeline.

The agreement is aligned with APICORP and ACWA Power’s shared mission of accelerating the energy transition in the MENA region and globally through green technologies, which currently comprise over 15% of APICORP’s financing portfolio. The facility has been earmarked for funding ACWA Power’s investments in renewable projects in the countries it operates in, as well as future high-growth markets.

The five-year tenor, says APICORP, “is well suited for financing a typical renewable project’s initial life cycle, enabling greater financial strength during the early development phase. Moreover, the APICORP facility can also be utilized as a revolver loan during the initial 3-year period, whereby it could be settled and redrawn as per ACWA Power’s liquidity needs, enabling the company to recycle capital and increase financial capacity for further portfolio development and growth.”

Nicolas Thévenot, Managing Director of Corporate Banking at APICORP, maintained that “backing the sustainable development of the Arab energy sector through innovative financing solutions continues to be a strategic priority for APICORP. Worldwide and across the MENA region, we are witnessing a concerted drive to accelerate the share of renewables in the energy mix through the adoption of innovative, low-carbon technologies and solutions. This agreement further cements our longstanding and fruitful partnership with ACWA Power to build a renewable, more sustainable energy future.”

According to Rajit Nanda, Chief Portfolio Management Officer at ACWA Power, “pursuing renewable energy development is the cornerstone of ACWA Power’s growth strategy, and we are focused on enabling transformative solutions to help reduce carbon footprint and increase the share of renewable energy in the Saudi Arabia, and globally. The timely closing of this facility has also further strengthened ACWA Power’s relationship with APICORP, a long-term financial partner.”

APICORP’s US$125 million facility, says the Corporation, will serve as an important funding source to support the agile and robust expansion of ACWA Power’s ‘green’ portfolio across markets. The revolving feature of this facility offers ACWA Power the flexibility to reallocate and thus optimize its utilization. “We look forward to continuing our collaboration with APICORP as we actively seek to unlock renewable energy potential and deliver long-term, sustainable value to nations, backed by our strong ESG framework,” it added.

Last October, APICORP provided a US$70.5 million commitment to support ACWA Power and other co-sponsors to develop Phase V of the Mohammed bin Rashid Al Maktoum Solar Park in Dubai, UAE, the world’s largest single-site solar park.

A rapidly emerging sector within the regional energy mix, APICORP forecasts that renewables will comprise just under one-third (32%) of the total value of planned and committed power projects in the MENA region for the period 2020-2024, the largest such share of any power generation source.

Banks Extend US$78.9m Islamic Credit Facility to ALAFCO to Support its Growing Aircraft Leasing Operations

Kuwait City – Kuwait’s Aviation Lease and Finance Company (ALAFCO), the aircraft leasing finance subsidiary of Kuwait Finance House (KFH) secured a short-term Sharia’a compliant credit facility totalling US$78.9 million from a consortium of banks in December 2020.

The company said in a statement to Boursa Kuwait that the proceeds from the facility would be used for ALAFCO’s operating requirements.

Established in 1992, ALAFCO’s growth has been measured and organic, ensuring that it can deliver sustainable long-term growth. The company has since grown to become a leading player in aircraft leasing, with over 70 aircraft leased to global airlines across 15 countries. As part of its plans to cement its position as a global leader, ALAFCO placed an order for over 130 new generation aircraft in 2017, with delivery expected to be completed during the coming years.

ADIB-UK Provides AED215m Islamic Structured Finance to Finance Three Retail Warehouse Assets in the UK

Abu Dhabi – Abu Dhabi Islamic Bank (ADIB)-UK has provided structured financing of AED 216 million (GBP44.5 million) across three (B&Q) let retail warehouse assets to support investors with their Islamic financing needs in the UK. 

The first transaction was with Bank of London and the Middle East (BLME) in respect of their retail warehouse investment in Castleford, West Yorkshire. The second transaction was with Kamco Invest in respect of their clients’ retail warehouse investments in Bury and Grimsby.

The three assets are all predominantly let to B&Q Limited, the UK’s largest DIY and home improvement retailer, on full repairing and insuring leases with approximately nine years remaining, no tenant break options, and upwards only rent reviews.

B&Q is owned by Kingfisher Plc, Europe’s largest home improvement retail group and the third largest in the world. The DIY sector has proven one of the most resilient sectors during the COVID-19 pandemic and the company has benefited from a surge in home DIY projects as people have spent more time in garden and undertaking home renovations during the lockdowns.

Paul Maisfield, Head of UK Real Estate at ADIB, stressed that “these transactions demonstrate that ADIB is a trusted partner in providing tailored Sharia’a-compliant financing solutions, with the ability to support clients with the origination of real estate investment opportunities in the UK. We are delighted to have supported BLME for the second time, following last year’s financing for the acquisition of Centrica headquarters in Edinburgh. We are equally pleased to have closed our first transaction with Kamco invest on behalf of their clients and we are look forward to helping support the execution of their UK commercial real estate investment strategy through targeting prime regional assets with good income visibility and strong tenant covenants with a focus on cash yield.”

According to Savills, the retail warehouse segment of the UK market saw their yields harden by 25 basis points in October 2020. This reflects a broadening acceptance amongst investors that not only are parts of the retail warehouse market more defensive against the rise of internet retailing, but that footfall on retail warehouse parks is almost back to normal levels due to more social distancing-friendly configuration. Retail warehousing remains very liquid and more transactional activity is expected in this sector in the coming months.

ADIB this year has closed major transactions in the UK including the AED91 million financing for a UAE-based client to acquire Grange Road Business Park in Christchurch, a AED320 million financing facility on a AED900 million prime London healthcare facility, and a AED55 million logistics hub in Edinburgh.

 

IILM Completes 2020 Calendar with US$900m Two-Tranche Short-term Sukuk in December as Total Issuances for 2020 to Date Tops US$12bn

Kuala Lumpur – The International Islamic Liquidity Management Corporation (IILM) successfully completed its final reissuance in 2020 with a of US$900 million short-term ‘A-1’ rated Sukuk across two different tenors of 1 and 3-months.

The Corporation held an auction on 8 December 2020 for the two series of issuances.

The two series were priced by the market as follows:

  1. US$400 million of 1-month tenor certificates at 0.35%.
  2. US$500 million of 3-month tenor certificates at 0.42%.

This follows the three-tranche reissuance of short-term securities in November totalling US$1.07 billion.

Against a backdrop of cautious market sentiments, stressed the Corporation, the reissuance generated strong demand from Primary Dealers and investors, with a combined orderbook in excess of US$1.45 billion representing an average oversubscription ratio of 1.6 times. 

In terms of investor diversification, the transaction enjoyed strong sponsorship from both Gulf Cooperation Council (GCC) and Asia based Primary Dealers, attracting sizeable orders across both tenors, said the Corporation.

“The successful completion of December’s issuance marks the final transaction in a year filled with unprecedented volatility and disruption due to the Covid-19 pandemic. Looking back over the last 12 months, the IILM has achieved several new milestones including increasing our overall outstanding issuance size to US$3.51 billion as well as conducting 35 issuances across a range of tenors to meet the varying demands of our Primary Dealers and investors.

“We are pleased to close out 2020 with a cumulative issuance amount of US$12 billion, the highest to date since our inaugural issuance. We hope to maintain this momentum going forward, in continuing to underpin the institution’s long-standing mandate and commitment to supply liquidity management tools for the Islamic banking community,” said Dr Umar Oseni, Chief Executive Officer of the IILM.

The IILM will commence its new issuance calendar in January 2021. The Corporation is a regular issuer of short-term Ṣukuk across varying tenors and amounts to cater to the liquidity needs of institutions offering Islamic financial services. Its short-term Sukuk programme is rated “A-1” by S&P.

“As we look towards 2021 with headwinds including uneven economic recovery, renewed lockdowns and rising debt burdens from government policy responses, we stand ready to collaborate with our shareholders, Primary Dealers, investors and industry partners towards fostering a resilient and sound Islamic liquidity management ecosystem.” added Dr Umar.

According to the IILM, the primary dealers that participated in the auction 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.

Saudi Banks Sign Murabaha Credit Facilities Totalling SAR1,166.32m for SASCO to Support Petrol Station Expansion Plan

Jeddah – Saudi Automotive Services Company (SASCO) raised a combined total of SAR1,166.32 million (US$300 million) in December 2020 through to the first week of January 2021 through two Sharia’a compliant credit facilities signed with local banks.

The first facility signed on 30 December 2020 is a renewal and rescheduling of an existing Sharia-compliant facility agreement with Riyadh Bank. The rescheduled facility has a total value of SAR536.32 million comprising a 7-year facility of SAR354 million; a 360-day facility of SAR20 million; bank guarantees totalling SAR130 million provided by the bank; SAR20 million of documentary credits, and a hedging facility totalling SAR12.32 million against fluctuations in floating profit rates and stabilizing profit rates.

The proceeds of the facilities will be used to restructure “the company’s cash flow conditions and improve the company’s cash and liquidity performance.”

SASCO also signed a SAR630 million Islamic credit facility with Al Rajhi Bank on 7 January 2021, comprising two long-term facilities of SAR200 million and SAR250 million; a SAR100 million short-term facility; bank guarantees totalling SAR50 million; and a hedging facility totalling SAR30 million against fluctuations in floating profit rates and stabilizing profit rates.

The SAR200 million long-term financing amounted has a tenor of 7 years, including a two -year grace period, while the other SAR250 million long-term financing has a tenor of 6 years, including a one-year grace period. The short-term financing extends to three months from the date of withdrawal.

The facilities are guaranteed by an order note amounting to 100% of the value. In a disclosure to Tadawul, SASCO said the proceeds from the facilities will be used for purchasing and building new and renovate existing petrol stations and for working capital purposes.

Saudi REITS Raise SAR795m Murabaha Facilities from Local Banks in December 2020 for Refinancing Existing Debt and Acquiring New Properties for Investment

Riyadh – Two real estate investment trust (REIT) funds listed on the Saudi Stock Exchange (Tadawul) raised Sharia’a compliant credit facilities totalling SAR794.5 million in December 2020.

The first transaction involves the signing of a SAR254.5 million Murabaha facility agreement between Al Rajhi Bank and Al Rajhi Capital, the fund manager of Al Rajhi REIT on 20 December 2020. 

In a disclosure to Tadawul, Al Rajhi Bank said the facility tenor is for 5 years, during which profit will be paid on a semi-annual basis with a bullet principal repayment at the end of the contractual period of 5 years. The proceeds of the facility will be used is to refinance the existing loan tranche that matured on 20 December 2020. “The Fund’s income-generating properties are already pledged for the existing tranche and the same shall be continued for this facility, in addition to a promissory note as guarantee,” said Al Rajhi Bank.

In the second transaction on 9 December 2020, Riyad Capital, the Fund Manager of Riyad REIT, similarly signed a SAR540 million Shariah-compliant facility agreement with Riyad Bank. The facility said Riyad Capital, will be used to finance acquisitions of new properties, investments and projects on behalf of Riyad REIT.

“As a security for the facility, a promissory note will be provided and income generating properties will be pledged. The facility duration is 5 years extendable to an additional 3 years. The facility amount will be paid once after 5 years from each withdrawal,” added Riyad Capital in a disclosure to Tadawul.

Islamic Corporate Finance Continues to Play Important Role in Saudi Petrochemical Sector with Two Murabaha Facilities Totaling SAR4.3bn (US$1.15bn) for Petro Rabigh and IPC in December

Jeddah – Islamic finance continues to play an important financing role in the Saudi petrochemical industry. Local banks provided Sharia’a compliant credit facilities to two projects in December 2020 totalling SAR4.3 billion (US$1.15 billion).

In the first transaction, Rabigh Refining and Petrochemical Company (Petro Rabigh) signed a SAR3.6 billion Sharia’a compliant credit facilities on 22 December 2020 with the Saudi Industrial Development Fund. The facility has a tenor of 12 years including a grace period until May 2021.

It is guaranteed by a Promissory Note with a value of SAR3.6 billion provided by Petro Rabigh. In a disclosure to the Saudi Stock Exchange (Tadawul), the company confirmed that the proceeds from the facility will be used to re-finance existing company debts with better terms and conditions and repayment period, in addition to settling other debt.

In the second transaction on 5 December, International Polymers Company (IPC), a subsidiary of Sahara International Petrochemical Company (Sipchem) (75%) and Hanwha Chemical Overseas Holdings Co. Ltd (25%), signed a SAR700 million Murabaha credit facility agreement with Riyadh Bank. The proceeds from the facility will be used to refinance an existing syndicated bank facility and Public Investment Fund (PIF) loan.  “The new facility provides favourable terms and pricing and converts the existing project finance into a pure Sharia’a structured facility,” said IPC in a statement to Tadawul.

According to the company, the original debt amount comprised a SAR704 million syndicated facility and PIF facility of the same amount. The total outstanding amount to be refinanced is SAR750.81 million through the new SAR700 million Murabaha facility. “IPC will drawdown the full amount of the new facility and the difference between the amount to be refinanced and the new facility will be funded by the internal cash sources of the IPC,” said the company.

The maturity date of the existing syndicated bank facility is in 2026 and 2027 for the PIF loan. The maturity date of the new unsecured Murabaha financing is in 2027, with a grace period of one and a half years from the date of refinancing and with a 30% bullet payment due at the final maturity date.

Securities Commission Malaysia and Bank Negara Malaysia Clarify Misconceptions Alleging “Policy Confusion over Cryptocurrencies”

Kuala Lumpur – Malaysian regulators, Bank Negara Malaysia (BNM) and the Securities Commission Malaysia (SC), have rejected any “policy confusion over cryptocurrencies” following a Letter to the Editor in the local media in December 2020 by Dr Paul Selva Raj, CEO of Federation of Malaysian Consumers Associations (FOMCA).

In a joint statement published by the two regulators on 15 December, they confirmed that they have been working collaboratively to develop policies and regulations related to cryptocurrencies and digital assets, with the aim of facilitating responsible innovation while managing any emerging risks related to this nascent sector.  For the purposes of digital assets, BNM and SC are regulating a specific set of business activities.

“BNM’s role as the overseer of payment systems is to ensure the safety, reliability, and efficiency of payment systems and instruments. Privately issued digital assets such as cryptocurrencies are not suitable as a general payment instrument as they do not exhibit the universal characteristics of money and face some limitations, including price volatility and vulnerability to cyber threats. Accordingly, digital assets are not a payment instrument that is regulated by BNM and does not constitute money that is legally accepted for the exchange of goods and services (not a legal tender) in Malaysia,” said the statement.

However, they agree that digital assets do have multiple use cases, including as an investible class of assets. As the regulator of the capital market in Malaysia, the SC has prescribed digital assets as securities under its laws. Pursuant to this, digital assets can be issued by a company for the purposes of raising funds subject to the issuer fulfilling the conditions set by the SC.

The Guidelines on Digital Assets referred to by Dr Paul Selva Raj seek to provide a framework for the issuance of digital assets in Malaysia for the raising of funds, while guidelines have also been issued by the SC to regulate online platforms which facilitate the trading of digital assets. “These guidelines,” assured BNM and SC, “do not in any way promote digital assets as a legal tender or a general payment instrument.”

Emirates Islamic Launches Sharia’a Compliant Omnichannel Digital Business Platform for Spectrum of Clients

Dubai – Emirates Islamic launched “businessONLINE”, a digital business banking platform, in December 2020 to help businesses in the UAE manage all their banking needs “on a single secure, intuitive Sharia’a compliant omnichannel platform across several geographies”

The platform is aimed at the bank’s small and medium business, large corporate and institutional client base. According to Emirates Islamic, businessONLINE is a comprehensive digital global cash management ecosystem with trade, treasury, virtual accounting, collections and liquidity management functionality on one user-friendly platform.

“businessONLINE,” according to Wasim Saifi, Deputy CEO of Consumer Banking and Wealth Management at Emirates Islamic, “puts Emirates Islamic at the cutting edge of corporate and business banking. As a pioneering Islamic bank in the UAE, we are pleased to offer best-in-class digital banking innovation to our clients, irrespective of their size. We have seen a marked increase in the usage of our digital banking channels this year, and look forward to continue supporting our clients through an agile, innovative platform as they transition to doing more of their business online.”

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