Malaysia’s Mortgage Securitiser Cagamas Raises RM945m in Second Monthly Hybrid Sukuk/Bond Issuance in First Two Months of 2021 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, continued its Sukuk/bond issuance programme for this year with a second consecutive monthly offering in February 2021.
Cagamas issued a three-tranche hybrid offering aggregating RM945 million on 21 February comprising a RM245 million 3-month Islamic Commercial Papers (ICPs) tranche, a RM300 million 3-month Conventional Commercial Papers (CCPs) tranche and a RM400 million 1-year Conventional Medium-Term Notes (CMTNs) tranche. Proceeds from the issuances will be used to fund the purchase of house financing and housing loans from the financial system, in the case of the ICPs Sharia’a compliant mortgages.
In January, Cagamas started the 2021 issuance calendar with a similar four-tranche hybrid issuance totalling RM710 million thus bringing the total issuances for the first two months to RM1,655 million. Of this a total of RM545 million were in ICPs. Cagamas’ total combined issuances for 2020 amounted to RM11.7 billion.
Datuk Chung Chee Leong, President/Chief Executive Officer of Cagamas, maintained that “as optimism for an economic recovery rose due to the increased rollout of COVID-19 vaccinations coupled with more opening up of economic activities, fixed income investors turned cautious, weighing-in the downside risk stemming from ongoing uncertainties in the near term. Notwithstanding, demand for short-term papers remain well-supported as evidenced by the successful conclusion of our ICPs, CCPs, and CMTNs issuances.”
“Both ICPs and CCPs were competitively priced at the corresponding 3-month Kuala Lumpur Interbank Offered Rate (KLIBOR) plus 2 basis points (bps), or equivalent to 1.96% based on KLIBOR fixing on the pricing date, while the 1-year CMTNs were priced at 2.10%. The spreads were 22 bps above the corresponding Malaysia Islamic Treasury Bills and Malaysia Treasury Bills for the 3-month ICPs and CCPs papers and 35 bps above the corresponding Malaysian Government Securities for the 1-year CMTNs,” he added.
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 RM319.3 billion worth of corporate bonds and Sukuk.
Indonesian Government Raises IDR12 trillion in Six-Tranche Rupiah-denominated Sukuk Auction in February 2021
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 with its second consecutive monthly auction in February 2021 raising IDR12 trillion through six tranches.
In January 2021 The Department of Islamic Financing at the Directorate General of Budget Financing and Risk Management, Ministry of Finance of Indonesia, raised a total IDR32 trillion through four auctions. The Government of Indonesia is a prolific issuer of domestic Sukuk and demand from local institutional investors is robust.
The January auction attracted total aggregate bids exceeding IDR60.72 trillion, while the February auction attracted bids exceeding IDR26.11 trillion.
The February 2021 issuances comprised six auctions of Sovereign Shariah Securities (SSS) or Sukuk Negara through the auction system of Bank of Indonesia. The auction was held on 9 February 2021 which raised IDR12 trillion comprising six tranches with tenors of 6 months, 15 months, 4 years and 8 months, 13 years, 16 years and 25 years and 8 months. The tranches were priced at a coupon rate at discount, 6.5%, 6.125%, 6.375%, 6.1% and 7.75% respectively.
Al-Moammar Information Systems Company Leads Saudi Consortium to Launch the Kingdom’s First Digital Bank with SAR25m Equity Investment Subject to SAMA Licence
Jeddah – The establishment of Saudi Arabia’s first digital bank inched closer following the disclosure to Tadawul (the Saudi Stock Exchange) in February 2021 by Al-Moammar Information Systems Company (MIS) that it has joined a consortium of several Saudi investors as found shareholders to establish a Sharia’a-compliant digital bank in the Kingdom.
MIS is contributing SAR25 million to the Bank’s capital. The digital bank will start operations as soon as it receives a final digital banking licence from the Saudi Central Bank (SAMA).
Currently SAMA has issued licences to four companies in its Fintech regulatory sandbox to what it classifies as “Digital Savings Solutions” or “Digital Savings Associations.” These include Business Research Storming Company, Money Loop, Noon Hakbah Co for Information Technology, and Savings Circles Company for Information Technology.
Saudi Investment Bank Signs SAR665m Murabaha Facility Agreement with Leading Saudi Non-Bank Mortgage Financier Amlak International
Riyadh – Amlak International Real Estate Finance Company, one of the leading Sharia’a-compliant Saudi non-bank real estate finance companies, signed a renewal agreement in February 2021 of its Murabaha (Tawarruq) credit facility with the Saudi Investment Bank (SIB). The new SAR664.5 million facility however has some amendments and took effect on 16 February 2021.
In a related party disclosure to Tadawul (Saudi Stock Exchange), SIB confirmed that the Bank has a direct interest in the agreement and three of its Board members – Faisal bin Abdullah Al-Omran, Chief Executive Officer SIB, Majed Abdulghani Fakeeh, General Manager – Corporate Banking at SIB, and Khalid bin Abdulaziz Al-Rayes, Chief Executive Officer of Al-Istithmar Capital, 100% owned by SIB – have indirect interests in the agreement. Amlak International in fact is owned by The Saudi Investment Bank, Amlak Finance (UAE) and Dallah Albaraka Holding Company. In a statement, SIB confirmed that “no preferential treatment was given on this agreement and it is within the usual business activity.”
The renewed facility has a tenor of 1 year and is guaranteed by the assignment of accounts receivables to Saudi Investment Bank and a Promissory Note supplied by Amlak International Real Estate Finance Company in favour of the bank. The proceeds from the facility will be used for balance sheet purposes and to expand the company’s mortgage finance provision.
IILM Continues Consecutive Monthly Short-Term Sukuk Issuance with US$1.35bn Three-Tranche Offering in February 2021 – the Highest Single Issuance Size since its Inception in 2010
Kuala Lumpur – The International Islamic Liquidity Management Corporation (IILM) continued its short-term Sukuk issuance calendar with its second monthly auction in February 2021. The auction raised US$1.35 billion through the issuance of short-term Sukuk across three different tenors.
The transaction comes under IILM’s US$4.0 billion short-term issuance programme. The Corporation held an auction on 15 February 2021 for the three series of issuances, priced by the market as follows:
- US$400 million of 1-month tenor certificates at 0.25%
- US$500 million of 3-month tenor certificates at 0.35%
- US$450 million of 6-month tenor certificates at 0.40%
This follows the three-tranche issuance of short-term securities January 2021 totalling US$1,150 million. This brings the total Sukuk issued by the IILM in the first two months of 2021 to US$2,500 million.
According to IILM, the February second issuance is the Corporation’s single highest issuance size since inception in 2010. “The IILM’s engagement and partnership with its Primary Dealers and investors across various jurisdictions have resulted in robust demand for its Sukuk in the current low-rate market environment,” stressed Dr Umar Oseni, Chief Executive Officer of the IILM.
The tender resulted in significant interest from Middle East-based Primary Dealers and both Middle Eastern and Asian investors, with a final orderbook in excess of US$2.3 billion, representing an average oversubscription rate of 1.8 times.
“February’s successful auction outcome continues to underscore strong investor confidence in the IILM as global markets and economies face the prolonged impact of Covid-19. We are pleased that with our latest well received milestone placement, which was fully covered in the early minutes of the auction window, the IILM has extended its 2021 track record of successful issuances” added Dr Oseni.
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. 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.
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.
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 Companies Continue to Access Tawarruq Facilities for Refinancing More Expensive Existing Debt and for Working Capital Requirements
Jeddah – Refinancing and working capital requirements continue to drive the commodity Murabaha (Tawarruq) market in Saudi Arabia, one the largest in the Islamic banking industry per se.
Halwani Brothers Company completed a SAR14.0 million Murabaha financing agreement with the local Al Rajhi Bank on 10 February 2021. The facility, said the company in a disclosure to Tadawul, comprised a 3-year SAR65 million medium-term credit facility and a SAR75 million 1-year renewable facility for working capital financing.
The facility is guaranteed by a promissory note provided by Halwani Brothers for the total facility amount. The proceeds from the facility will be used to restructure and refinance the company’s current loans to reduce costs.
Al Rabie Saudi Food Company Ltd., a subsidiary of Aseer Company for Trade, Tourism, Industry, Agriculture, Real Estate and Contracting Business, similarly signed a SAR342 million Murabaha credit facility with Samba Financial Group on 1 February 2021.
Of the SAR342 million, SAR150 million is a long-term credit facility (to be used to restructure and refinance the company’s current loans) and SAR192 million is for working capital financing. The tenor of the long-term loan is 5 years including a 6-month grace period, while the tenor for the working capital facility is for 1 year, renewable on a yearly basis.
The facility is guaranteed by a promissory note provided by Al Rabie Saudi Food Company for the total facility amount.
Saudi British Bank Reschedules SAR89.02m Tawarruq Facility for Abdul Mohsen Al Hokair Group Company for Tourism and Development
Jeddah – Abdul Mohsen Al Hokair Group Company for Tourism and Development has rescheduled its Murabaha (Tawarruq) facility agreement with Saudi British Bank (SABB) in February 2021. The rescheduling of the facility stressed the company in a disclosure to Tadawul (Saudi Stock Exchange) “will have a positive impact in managing the company’s cash flow.”
The total facility agreement amounted to SAR89,024,485.52. Of this, the financing terms for a Tawarruq facility amounting to SAR74,674,094.80 was rescheduled to a term of 5 years including a 1-year grace period. The initial tenor was for 4 years including a 1-year grace period.
The tenor for the remaining Tawarruq facility amounting to SAR14,350,390.72 after the rescheduling is 6 years including a 1-year grace period. The financing term before the rescheduling was 5 years including a 1-year grace period.
The rescheduled financing facilities are guaranteed by a promissory note supplied by Abdul Mohsen Al Hokair Group Company for Tourism and Development.
SAMA Launches Instant Payment System SARIE Aimed at Tracking and Further Developing the National Infrastructure for Digital Payments
Riyadh – The Saudi Central Bank (SAMA) launched Sarie, an instant payment system, in February 2021 aimed at tracking and further developing the national infrastructure for digital payments in the Kingdom.
“The launching of the Sarie system comes as part of a series of SAMA-led initiatives to promote the national payments’ ecosystem and to enhance its infrastructure, aiming to achieve financial inclusion,” explained Dr Fahad bin Abdullah Al-Mubarak, Governor of SAMA at the launch.
National payment systems are fundamental in strengthening the Kingdom’s financial sector. According to Governor Al-Mubarak, they offer secure and innovative payment solutions, meet the needs of various segments of the economy, and increase the effectiveness of the liquidity circulation in the financial system, through reducing the operational costs of cash handling, facilitating sending and receiving payments, and driving the digital transformation in the Kingdom by increasing the volume of digital financial transactions.
Fahd Al-Akeel, Managing Director of Saudi Payments, speaking at the launch revealed that work on the Sarie system has been ongoing for almost a year. “Despite the challenges posed by the COVID-19 pandemic,” he added, “the speed of the instant payment system’s deployment across all the local banks is the fastest of its kind worldwide. Sarie services will allow the banking sector’s clients to send and receive low-value local transactions around the clock and for a low fee, not exceeding one Saudi Riyal.”
In addition, the system provides beneficiaries with other services and transfer options, including using a mobile number as an identifier instead of IBAN for transactions between banks, and the ability to verify the validity of the recipient’s bank account before completing the transaction. Financial transactions of less than SAR20,000 will also be instantly credited to the recipient account by the Sarie system. The system also offers a quick transfer service, which, upon activation by the account holder, allows the banking sector’s clients to send payments of amounts less than SAR2,500 without adding and activating the beneficiary.
According to Al-Akeel, the Sarie system is as an essential milestone in the developing payment systems in the Kingdom, and a significant indicator of its advanced digital infrastructure. “It will enable banks and fintech companies, in particular, to develop innovative financial services that align with the requirements of the digital economy goal adopted by the Kingdom as part of its nationwide digital transformation strategy,” he added.
HSBC Middle East Arranges “First-of-its-Kind” US$100m Islamic Refinance Trade Facility for Qatar Islamic Bank
Doha – HSBC Bank Middle East arranged a US$100 million Financial Institutions Refinance Trade Facility for Qatar Islamic Bank (QIB) in February 2021.
The facility, says HSBC, is a new addition to HSBC Bank Middle East’s Islamic product suite. Qatar is the first MENAT (Middle East, North Africa and Turkey) country in which the new facility has been rolled out.
“This is a first-of-its-kind transaction for HSBC Bank Middle East within the MENAT region and we are very proud that Qatar was the first country where it was executed. We are very optimistic about the different growth opportunities in Qatar that is driven by the expansion in gas production, final preparations for the FIFA 2022 World Cup and ongoing investment in infrastructure development. This transaction signals a strong start to the year,” said Abdul Hakeem Mostafawi, CEO of HSBC Qatar.
Both HSBC and QIB have yet to release details of the “first-of-its-kind” trade finance facility and how it differs from other Sharia’a-compliant trade finance products in HSBC’s product suite. If the product takes off, as it is expected, local bankers stress that it could prove strategically important for HSBC’s Islamic finance profile in the MENAT region.
Barwa Real Estate Raises Aggregate US$321.94m in Murabaha Financing Facilities from Two Local Banks in First Two Months of 2021
Doha – Barwa Real Estate company, part of the Barwa Group in Qatar, signed an Islamic financing facility in February 2021 – its second such facility in the first two months of the new year.
In a disclosure to the Qatar Stock Exchange (QSE), Barwa Real Estate Group announced the signing of a refinancing agreement for a facility with Ahli United Bank amounting to US$157.14 million. The proceeds from the facility will be used to refinance part of the company’s current debt obligations, thus strengthening the Group’s balance sheet. The term of the new financing is up to 3 years.
Barwa Real Estate Company signed a similar long-term QR600 million Murabaha financing agreement with Qatar Islamic Bank (QIB) in January 2021. The proceeds from that facility are being used to finance part of Barwa Real Estate’s capital expenditure for the Group’s projects in 2021.