Upside from Cagamas' RM1b dual currency issuance

Cagamas issues debt securities to finance the purchase of housing loans from financial institutions and non-financial institutions.

KUALA LUMPUR: Cagamas Bhd's dual currency issuance totalling RM1bil equivalent enabled it to obtain a lower weighted average funding cost. 

Cagamas, which is the National Mortgage Corporation of Malaysia, announced on Tuesday its issuance comprised one-year US$130mil and one-year RM470mil conventional medium term notes (MTN). 

The US dollar issuance was through its unit Cagamas Global PLC under Cagamas’ US$2.5bil conventional multicurrency MTN programme. The ringgit issuance was under Cagamas’ existing RM40bil IMTN/MTN programme. 

Cagamas CEO Chung Chee Leong explained the dual currency issuance was the option after consistent monitoring and analysis on comparative advantages between foreign currency and domestic bond issuances.

“Amid uncertainty in interest rate expectations post non-farm payroll release in the US and pre- Monetary Policy Committee meeting in Malaysia, the dual currency issuance was favoured to obtain a lower weighted average funding cost,” he said. 

The issuance of one-year US$130mil was done through a private placement and competitively priced at 1.60%, Chung said.

As for the Ringgit issuance, there was a commendable bid-to-cover-ratio of 2.6 times. The subscribers consisted of asset managers (15%), financial instituitions (62%), insurance groups (9%), sovereign wealth funds (13%) and the remaining 1% was subscribed by new local corporate investors. Foreign participation represented 13% of the Ringgit issuance. 

The new issuance will raise Cagamas's aggregate issuance for the year to RM5.4bil. 

The CMTNs, which will be redeemed at their full nominal value on maturity, are unsecured obligations of the company, ranking pari passu among themselves and with all other existing unsecured obligations of the company. 

Cagamas, which was set up in 1986, promote the broader spread of house ownership and growth of the secondary mortgage market in Malaysia. 

It issues debt securities to finance the purchase of housing loans from financial institutions and non-financial institutions. 

The provision of liquidity to financial institutions at a reasonable cost to the primary lenders of housing loans encourages further expansion of financing for houses at an affordable cost.