IILM to sell RM5.5bil worth of Islamic notes

KUALA LUMPUR: International Islamic Liquidity Management Corp (IILM), which counts nine central banks as its shareholders, plans to sell US$1.34bil (RM5.54bil) of three-month bills, its biggest offering since being set up in 2010 to support syariah-compliant financial activity.

The Kuala Lumpur-based institution, which added two more primary dealers to its existing network of nine last week, would auction the Islamic notes on Feb 18, it said in a statement. The company known as IILM has a short-term issuer rating of A-1 from Standard & Poor’s, the second highest investment grade, and has sold a total US$14bil of debt denominated in the US currency.

While IILM has increased issuance of short-term paper each year since its debut offering in 2013, the supply is far short of the US$400bil that Ernst & Young LLP estimates is needed to help Islamic banks manage their liquidity. Global sukuk sales slumped 29% in 2015, the most since the credit crunch of 2008.

“There’s a lot of demand for short-term paper from banks seeking to manage their cashflow,” said Adissadikin Ali, the Kuala Lumpur-based chief executive officer at the Malaysian unit of Bahrain’s Bank Alkhair. “IILM’s planned sale is a positive move as it will promote greater activity in the Islamic finance industry.”

Worldwide Islamic bond sales fell to US$35.4bil in 2015, the lowest in five years, data compiled by Bloomberg show. Issuance edged up 1.8% in 2014 and declined 5.6% the previous year, off the peak of almost US$52bil in 2012.

IILM was formed by central banks including those from the Middle East, South-East Asia, Africa and Luxembourg, as well as the Islamic Development Bank based in Saudi Arabia.

The yield on its existing Islamic bills maturing in April rose two basis points to 1.11% on Wednesday, according to data compiled by Bloomberg. The notes were sold to yield 1.0736%. — Bloomberg