Govt plans US$500m, 600mil euro bonds


THE government will be making two large bond issues to raise foreign currency for benchmarking purposes and to refinance existing debt of one of its agencies, Second Finance Minister Datuk Dr Jamaludin Mohd Jarjis said. 

Government agencies, he added, have been directed to refinance existing debt to lower their interest payment and improve cashflow. 

Speaking to the media yesterday after witnessing the launch of KLIA Bhd’s RM4.06bil Islamic private debt securities issue, Jamaludin said the government, through Penerbangan Malaysia Bhd (PMB), would raise between US$500mil and US$750mil early next month to refinance PMB's existing debt and for working capital. 

(From left): AmBank group chairman Tn Sri Azman Hashim, Datuk Jamaludin Jarjis and KLIA Bhd chairman Datin Husniart Tamin.

”With (US interest rates) a firm 25 basis points lower (after the US fed cut rates), PMB will now go to the market,'' he said. 

PMB was issuing dollar-denominated debt in July but Jamaludin said the agency could issue debt in other denominations, like the euro, later on. 

According to Jamaludin, the government will also raise around 600 million euros in September or October, however, the final decision on the size and type of euro-denominated issue would be left to Bank Negara. 

He said the euro-denominated Islamic debt would be issued to build on the success of the Islamic Sukuk, and for benchmarking purposes. 

The government launched the US$600mil Malaysian Global Sukuk in June last year, the world's first sovereign global Islamic Sukuk

Jamaludin also said that agencies and companies under government control have been directed to refinance existing debt where possible. 

“This is a process for all government companies, to look at refinancing to lower their cost,'' he said. 

Jamaludin added that the move would make Malaysia more competitive. 

“We are asking the private sector to lower the cost of doing business, and for sovereign Malaysia, we must also look at that.'' 

KLIA Bhd refinanced a big chunk of its conventional loans to lower its cost of borrowings when it issued RM4.06bil Islamic Private Debt Securities yesterday. 

There are five tranches of bonds, with tenure ranging from five to 12 years. The bonds have been rated AAA(s) by Rating Agency Malaysia Bhd. 

Supporting the bonds is an issuance of primary and secondary notes in bearer form.  

The notes are of RM500mil each for tenures of five to 11 years, and RM560mil for a tenure of 12 years. 

Jamaludin said the Islamic bond refinanced about 40% of KLIA's total debts. 

AmMerchant Bank, the advisor and sole arranger for the KLIA Islamic bond, hopes to issue the bonds by the end of this month. 

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