Business News

Khazanah issues RM1.59bil Islamic bonds exchangeable into TNB shares

Friday, 5 September 2014

A debt capital market specialist told StarBiz that an exchangeable sukuk that was priced at a negative yield implied that investors valued the option highly and were willing to invest in the paper issued.

A debt capital market specialist told StarBiz that an exchangeable sukuk that was priced at a negative yield implied that investors valued the option highly and were willing to invest in the paper issued.

PETALING JAYA: Khazanah Nasional Bhd has issued a US$500mil (RM1.59bil) seven-year sukuk that is exchangeable into Tenaga Nasional Bhd (TNB) shares.

This is the second issuance by the state investment arm in three weeks.

Bloomberg reported that Khazanah, which is buying out the 30.6% it does not own in Malaysia Airlines, sold RM1.5bil Islamic bonds on Aug 16.

The sukuk Khazanah issued three weeks ago has a five-year tenure with a 4.14% yield.

On the other hand, the convertible sukuk the fund announced yesterday was priced through an accelerated book-building process at -0.05% yield to maturity with a 15% exchange premium that is convertible into TNB shares.

This is the first seven-year put four exchangeable sukuk that Khazanah has priced at a negative yield.

A debt capital market specialist told StarBiz that an exchangeable sukuk that was priced at a negative yield implied that investors valued the option highly and were willing to invest in the paper issued.

“An exchangeable sukuk priced at a negative yield is not common in this market. Investors who subscribe to the exchangeable sukuk will need to have the confidence that there is much more upside potential (for the TNB shares) compared to the downside risk,” he explained.

The sovereign wealth fund’s managing director Tan Sri Azman Mokhtar said: “Malaysia is a leader in the dynamic Islamic finance sector, continuously pushing the boundaries in product innovation and market depth. The issuance of this exchangeable sukuk is in line with Khazanah’s fund-raising strategy and long-term commitment towards a progressive divestment of its investments.”

In a statement, the fund said the papers were oversubscribed by 1.6 times.

Analysts polled by Bloomberg showed that 76% had a “buy” call on TNB, while 20% had a “hold” rating.

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