CIMB, DBS and Standard Chartered are lead managers for the deal. The Reg S senior unsecured bonds will list in Malaysia and Singapore under English and Malaysian law.
KUALA LUMPUR: Khazanah Nasional Bhd has raised US$398.8mil (RM1.622bil) from the issuance of sukuk that can be exchanged into shares in Beijing Enterprises Water Group Ltd (BEWG).
The Government’s strategic investment fund said in a statement onh Thursday that the sukuk, which can be converted into the shares that it holds in a leading integrated water and sewage treatment solutions service providers in China, had been successfully priced via a Labuan incorporated independent special-purpose vehicle, Bagan Capital Ltd.
The sukuk was priced through an accelerated book-building process and achieved a final pricing of 43.0% exchange premium with zero periodic payment and 0.00% yield to maturity.
“The transaction achieved the highest exchange premium for a zero coupon and zero yield exchangeable sukuk since 2007 in Asia-Pacific ex-Japan reflecting the market’s confidence in BEWG’s growth story supported by Khazanah’s strong credit,” Khazanah said.
The sukuk, which has a tenor of five years with an investor put option at the end of the third year, drew demand from a diverse group of investors comprising long only funds, hedge funds, arbitrage funds as well as asset managers across Asia and Europe.
The exchangeable sukuk will be listed on the Singapore Exchange Securities Trading Ltd, Labuan International Financial Exchange Inc and Bursa Malaysia (under the Exempt Regime).
Khazanah said its investment in BEWG of HK$1.18bil (RM486mil) in October 2013 was part of a wider collaboration with the Beijing Enterprises Group Co Ltd to further strengthen its exposure to the fast-growing environmental-related sectors in China including water and waste-to-energy.
At Aug 31’s closing price of HK$5.41, Khazanah’s stake in BEWG is valued at HK$2.164bil (RM1.151bil), which translates into an investment gain of HK$984mil (RM665mil), implying a holding period return (HPR) of 146%.
Assuming full exchange of the sukuk at the exchange price, it said, the stake would be valued at HK$3.095bil (RM1.622bil) or an implied HPR of 249%.
The exchangeable sukuk, structured based on the principle of Wakalah, is a novel Islamic finance solution whereby it references a stock in the water utility sector that does not meet the financial ratio requirements for syariah-compliance set by the Dow Jones Islamic Market Index and FTSE Shariah Global Equity Index Series.
Khazanah chief financial officer Datuk Mohd Izani Ghani said: “This unique structure allows Islamic investors to participate as Khazanah would satisfy any exchanges via a cash settlement if BEWG shares do not meet the financial ratios for syariah-compliance on the date of the exchange.
“The structure also provides the sukuk holder the option to request for Khazanah to settle the exchange right by delivering BEWG shares in lieu of cash, subject to the terms and conditions of the sukuk. This is another milestone in Khazanah’s track record of innovative and landmark transactions.”
BEWG represents the seventh underlying security offered by Khazanah in an exchangeable sukuk format.
Bank of America Merrill Lynch, CIMB and Deutsche Bank are the joint bookrunners and joint lead managers for the exchangeable sukuk transaction.
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