Malaysia’s Mortgage Securitiser Cagamas Starts 2021 with Four-Tranche RM710m (US$176.2m) Hybrid Sukuk/Bond Offerings to Fund Purchases of Housing and Commercial Mortgages

Kuala Lumpur – Cagamas Berhad, the National Mortgage Corporation of Malaysia, one of the most prolific issuers of Sukuk, started its Sukuk/bond issuance calendar for 2021 with aggregate issuances of RM710 million in four tranches on 19 January.  

The transaction comprised a RM300 million Islamic Commercial Papers (ICPs) tranche, a RM300 million Conventional Commercial Papers (CCPs) tranche, a RM55 million 1-year Conventional Medium Term Notes (CMTNs) tranche and a RM55 million 3-year CMTNs tranche. Proceeds from the issuances will be used to fund the purchase of house financing, housing loans and industrial hire purchases from the financial system.

Cagamas closed the year 2020 with a combined RM450 million (US$111.1 million) two-tranche Sukuk issuance on 21 December 2020. Its total combined issuances for 2020 amounted to RM11.7 billion.

“We are excited to start the year with the successful conclusion of transactions despite headwinds on multiple fronts arising from the continued surge of COVID-19 cases which resulted in another Movement Control Order and state of emergency declaration by the Government, fuelling a growing uncertainty on expectations of a strong domestic economic recovery,” said Datuk Chung Chee Leong, President/Chief Executive Officer of Cagamas. “The successful conclusion of these transactions indicates continued confidence in Cagamas papers, supported by a strong and resilient domestic bond market,’’ he added.

Both ICPs and CCPs were competitively priced at the corresponding 3-month KLIBOR minus 2 basis points (bps), or equivalent to 1.92% on KLIBOR fixing on the fixing date, representing 19 bps spread above the corresponding Malaysia Islamic Treasury Bills (MITB). The CMTNs were priced at a spread of 37 bps and 52 bps above the corresponding Malaysian Government Securities.

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 November, 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.


Indonesian Government Starts 2021 Raising IDR32 trillion (US$2.3bn) in Four Rupiah-denominated Sukuk Issuances in January 

Jakarta – The Government of Indonesia continues to consolidate its role as one of the most proactive repeat issuers of sovereign domestic Sukuk in the market starting the new year with four issuances in January 2021 raising a total IDR32 trillion through four auctions. The auctions attracted robust local institutional investor interest with total aggregate bids exceeding IDR60.72 trillion.

The Department of Islamic Financing at the Directorate General of Budget Financing and Risk Management, Ministry of Finance of Indonesia, is a prolific issuer of Sukuk on behalf of the Government of Indonesia.

The January 2021 issuances comprised four auctions of Sovereign Shariah Securities (SSS) or Sukuk Negara through the auction system of Bank of Indonesia. The first auction was held on 12 January 2021 which raised IDR11.3 trillion comprising six tranches with tenors of 6 months, 27 months, 4 years and 8 months, 13 years, 16 years and 25 years and 8 months, with bids totalling IDR24.271 trillion. The tranches were priced at a coupon rate at discount, 6.5%, 6.125%, 6.375%, 6.1% and 7.75% respectively.

The second auction of SSS was held on 13 January 2021 which raised IDR4.7 trillion comprising four tranches with tenors of 4 years and 8 months, 13 years, 16 years and 25 years and 8 months, with bids totalling IDR4.921 trillion. The tranches were priced at a coupon rate of 6.125%, 6.375%, 6.1% and 7.75% respectively.

The third auction of SSS was held on 26 January 2021 which raised IDR9 trillion comprising six tranches with tenors of 6 months, 27 months, 4 years and 8 months, 13 years, 16 years and 25 years and 8 months, with bids totalling IDR23.341 trillion. The tranches were priced at a coupon rate at discount, 6.5%, 6.125%, 6.375%, 6.1% and 7.75% respectively.

The fourth auction of SSS was held on 26 January 2021 which raised IDR7 trillion comprising five tranches with tenors of 27 months, 4 years and 8 months, 13 years, 16 years and 25 years and 8 months, with bids totalling IDR8.157 trillion. The tranches were priced at a coupon rate at 6.5%, 6.125%, 6.375%, 6.1% and 7.75% respectively.

Bahri Subsidiary NCC Pens SAR1.23bn (US$328m) Murabaha Financing Agreement with SAMBA Financial Group to Fund Building of Ten Chemical Tankers

Jeddah – The National Chemical Carriers Co., Ltd. (NCC), a subsidiary of Bahri, The National Shipping Company of Saudi Arabia, signed a SAR1.23 billion Murabaha credit facility with SAMBA Financial Group 0n 21 January 2021.

In a disclosure to Tadawul (The Saudi Stock Exchange), the company said that the facility has a 12-year tenor, and the proceeds will be used to cover 80% of the cost of building 10 chemical tankers with a capacity of 49,999 DWT each. The facility has the guarantee of a lien on the tankers being financed.

Bahri, a global leader in logistics and transportation, announced encouraging financial results Q4 and FY2020, despite the impact of COVID-19 especially reduced global trade and demand.

The company reported a 153% increase in net profit from SAR621 million in 2019 to SAR1.6 billion in 2020. Revenue rose by 28% to SAR8.4 billion, as compared to SAR6.6 billion for the previous year.

Abdullah Aldubaikhi, CEO of Bahri, explained that “undeterred by the COVID-19 pandemic, Bahri continued to run its operations effectively, leveraging the power of its resilient business model and technology, and pushed on with its diversification plans and capacity-building programs. It is our perseverance and unyielding commitment to offering excellent and uninterrupted service to our customers around the world —even in the face of uncertainties and crises — that helped us navigate challenges and drive growth in annual revenues and profitability.”

Bahrai regularly accesses funding from the Islamic finance market. Its profitability came under pressure in Q4 2020 largely due to the decline in time charter equivalent (TCE) prices as compared to the previous quarters.


DIB and Ajman Bank Arrange AED337m (US$91.8m) Murabaha Facility for Sharjah-based Real Estate Developer Arada

Sharjah – Dubai Islamic Bank (DIB) and Ajman Bank signed a AED337 million Murabaha credit agreement with Sharjah-based real estate developer Arada in January 2021. DIB will contribute AED300 million and Ajman Bank AED37 million to the transaction.

The proceeds from the facility will be used to help finance the construction of residential projects that were launched last year but were disrupted by delays due to the COVID-19 pandemic.

Arada is constructing a new upscale community, the Naseej District in Sharjah, which will feature 16 residential buildings. It also launched two other developments, the Vida Residences Aljada, which is in partnership with Emaar Hospitality Group, and the second Sarab garden villa community.

Despite the challenges, Arada ended 2020 on a positive note with robust take-up of residential units in Sharjah. This despite a fall in sales during the global lockdown last year, albeit demand has started to grow following the easing of lockdown restrictions.

The UAE’s property market is showing signs of improvement, but the overall demand remains weak compared to pre-COVID-19 levels.


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) started its Sukuk issuance calendar in January with the successful auction of its first offering in 2021 of a US$1.15 billion short-term ‘A-1’ rated Sukuk across three different tenors of 1, 3 and 6-months.

The transaction comes under IILM’s US$4.0 billion short-term issuance programme. The Corporation held an auction on 19 January 2021 for the three series of issuances,  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 0.40%
  3. US$250 million of 6-month tenor certificates at 0.40%

This follows the two-tranche reissuance of short-term securities in December 2020 totalling US$900 million.

Against a backdrop of cautious market sentiments, stressed the Corporation, the auction attracted favourable demand from both Primary Dealers and investors with a combined orderbook in excess of US$2,079 million, representing an average oversubscription ratio of 1.8 times.

“We are very pleased to open the year with the successful auction of US$1.15 billion short-term Sukuk,” maintained Dr Umar Oseni, Chief Executive Officer of the IILM. “The transaction’s coverage ratio and its competitive yield continue to reflect confidence and positive sentiment from Primary Dealers and investors despite on-going uncertainty associated with the global COVID-19 pandemic. The IILM remains focused on staying vigilant and resilient during this period to ensure seamless delivery of our mandate as a frequent issuer of Sharia’a-compliant liquidity instruments,” he added.

In terms of investor diversification, the inaugural transaction for 2021 enjoyed strong sponsorship from both GCC and Asia based Islamic Primary Dealers. The IILM is a regular issuer of short-term Sukuk across varying tenors and amounts to cater to the liquidity needs of institutions offering Islamic financial services.

“Based on our indicative issuance calendar, the IILM envisages issuing in excess of USD1.0 billion short-term Sukuk for nearly every month in 2021.” added Dr Umar. The IILM’s short-term Sukuk programme is rated “A-1” by S&P with current outstanding issuance size amounting to US$3.51 billion.

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. “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 Renew Murabaha Credit Facilities Totalling SAR318m (US$84.8m) for Al Moammar Information Systems and MEPCO 

Jeddah – Two Saudi companies have renewed their Islamic credit facilities with local banks in January 2021. Al Moammar Information Systems Company (MIS) renewed its SAR216.25 million Sharia’a-compliant credit facility agreement with the Saudi British Bank (SABB) on 26 January.

The drawdown period of the facility is effective from 28 January to 31 December 202, and the facility is guaranteed through a promissory note equivalent to the face value of the facility in favour of SABB. Proceeds from the facility will be used to finance new projects and for financing supply chain requirements.

Similarly, Middle East Paper Co. (MEPCO) renewed its revolving SAR101 million Murabaha facility agreement with Riyad Bank also on the same day. The facility is secured by a promissory note (equivalent to the facility value) in favour of the bank.

The purpose of this facility is to finance the company’s working capital & spare parts for factory machines.


Saudi Printing and Packaging Company Dubai Subsidiary Raises AED475m (US$129.3m) Murabaha Facility from Commercial Bank of Dubai 

Dubai – In a rare cross-border financing transaction, Emirates National Factory for Plastic Ind LLC, the wholly-owned Dubai-based subsidiary of Saudi Printing and Packaging Company, signed an AED475 million Murabaha financing facility agreement with Commercial Bank of Dubai on 26 January 2021.

In a disclosure to Tadawul, Saudi Printing and Packaging Company confirmed that the facility has two tenors – a long-term financing of AED375 million, to be repaid over 8 years; and a short-term financing amounted to AED100 million.

Guarantees offered for the financing includes a promissory note (equivalent to facility value) in favour of Commercial Bank of Dubai and other collateral.

The proceeds under the long-term facility will be used towards an early settlement of outstanding facilities with other banks in the UAE amounting to AED275 million and for financing capital projects totalling AED100 million. The amount utilized under the short-term facility will be used to fund the company’s working capital requirements.

Sharia’a-compliant Bank Syariah Indonesia Launches after Merger to become 7th Largest Banking Group in the Country

Jakarta – Indonesia’s latest Islamic bank, PT Bank Syariah Indonesia, was officially launched at end January 2021 by President Joko Widodo.

PT Bank Syariah Indonesia is actually a merger between the Islamic banking windows of the state-owned BNI Syariah and of Bank Syariah Mandiri. “In the midst of the COVID-19 pandemic, I am pleased to be informed that the performance of the Indonesian Islamic banking continues to record stable growth, and that Islamic banking has managed to grow, even higher than conventional banking,” stressed President Widodo at the inauguration of the ‘new’ bank, headquartered in Jakarta.

Whether the new bank and the growth of Islamic banking in the world’s most populous Muslim country raises unrealistic expectations only time will tell. The Islamic banking sector has traditionally lagged behind its conventional counterpart and has been faced with several hurdles, including policy shortcomings where one arm of the government is not aware what the other arm is doing. The country last year launched an Islamic Finance Road Map but there has been little information about the progress of implementation.

Nevertheless, President Widodo revealed that despite the COVID-19 pandemic, the Islamic banking industry in 2020 marked a 10.9% year-on-year growth in assets compared with the 7.7% growth in the conventional banking sector. If one adds collection of third-party funds (DPK), the Islamic banking industry was able to record a growth of 11.56% compared with 11.49% for conventional banks.

On the financing side, the Islamic banking industry registered year-on-year growth of 9.42%, much higher than the 0.55% for the conventional banks. “I believe Indonesia’s sharia economy will grow very fast and will contribute significantly to the welfare of our people and society,” declared President Widodo.

The merged entity, PT Bank Syariah Indonesia, at end 2020 reported combined total assets of IDR240 rupiah ($17.13 billion) and core capital of IDR22.6 trillion. It is the seventh largest bank in Indonesia with 1,200 branches throughout the country and 20,000 employees.

Kuveyt Turk Interest-free Digital Banking Platform Senin Bankan Attracts TL4.173bn (US$595.6m) in Customer Deposits at end 2021

Istanbul – The potential digital banking in the participation (Islamic) banking space continues to grow in markets such as Turkey. Senin Bankan, the pioneering first interest-free digital banking platform in Turkey launched by Kuveyt Türk Participation Bank in 2016, has seen customer deposits reach a healthy TL4.173 billion at end 2020.

In 2020, the number of customers increased by 81% year-on-year and customer deposits by 206%. Kuveyt Türk’s total number of digital customers, including Senin Bankan customers, exceeded 1.5 million.

“We are ready for branchless banking with the Senin Bankan experience,” stressed Ufuk Uyan, CEO of Kuveyt Türk Participation Bank. “Since the digital platforms were introduced, the expectations of customers have changed a lot. Customers are now willing to perform any financial transactions they wish, wherever they are, in the most secure and fastest way. In order to meet these demands and needs, we have been offering our customers the service of opening an account and making investments without going to a branch for 5 years with Senin Bankan.”

Senin Bankan is unique in other ways. Its specialised app allows customers to move their transactions to mobile as much as possible, from invoice payments to precious metals and foreign exchange trading transactions, from money transfer to insurance and investment transactions, in a fast and secure manner.

An added boost came on 1 January 2021, when the Turkish banking regulator, BRSA’s Communiqué on Remote Identification Methods come into force, allowing customers to open a digital bank account without going to the branch through remote identity verification via online video calls.

Senin Bankan customers do not pay any expenses such as account maintenance fees, EFT and money transfer fees. Uniquely, it also offers a Gold Investment Account; and allows customer to make silver or platinum purchases through Other Precious Metal Accounts.

QIB Signs QR600m (US$164.8m) Financing Agreement with Barwa Real Estate

Doha – Qatar Islamic Bank (QIB) has signed a long-term QR600 million Murabaha financing agreement in January 2021 with Barwa Real Estate company, part of the Barwa Group in Qatar.

In a statement, QIB said the proceeds from the financing facility will be used to finance part of Barwa Real Estate’s capital expenditure for the Group’s projects.

Meanwhile, the COVID-19 uncertainty continues to disrupt the real estate investment market in the Middle East. Swicorp, the Fund Manager of Swicorp Wabel REIT, confirmed in January 2021 that National Commercial Bank (NCB) has informed

Swicorp of its decision to not extend the availability period of the SAR1.4 billion Murabaha financing facility agreed by NCB on 26th June 2019. The availability period for the Fund has elapsed.

According to SWICORP, no amounts were drawn from this facility by the REIT during the availability period. In light of the challenging market conditions that were mainly triggered by the COVID-19 pandemic, Swicorp is currently in discussions with various other banks to secure debt financing facilities for the Fund to finance the Fund’s growth plans.


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