BANK Islam Malaysia Bhd (BIMB) plans to further expand its capital market division in view of the strong growth potential of the Islamic debt market.
“Our capital market team is currently working on some RM7bil worth of projects, involving the issuance of several Islamic bond products,'' Raja Datuk Zainal Alam Shah, BIMB's general manager, corporate and institutional banking, said in Kuala Lumpur yesterday.
He said that despite the volatility in the global bond market in the past few months, the number of Islamic private debt securities (IPDS) issued in Malaysia had continued to rise.
IPDS are estimated to account for about half the funds raised from the local bond market last year.
Yesterday, BIMB signed an agreement to advise and arrange Merbok Hilir Bhd's first Islamic debt securities worth RM150mil.
“The financial restructuring of the Merbok group due to the forthcoming bond issuance will result in a shift from the current predominantly short-term financing to a medium/long-term financing structure,'' Merbok group managing director Robert Kokshoorn said after the signing ceremony.
The RM150mil Bai' Bithaman Ajil ((BBA) bonds facility, which has been fully placed out to investors, would be issued in five tranches with maturity ranging from three to seven years.
“The BBA bond facility would provide Merbok with the flexibility in managing its funding requirements and enable the group to tap the capital market to raise funds at competitive rates,'' he said, adding that the BBA was to refinance Merbok's existing financing and provide it with additional working capital.
“This structural improvement in balance sheet (due to the bond issue) will form the basis for the next contemplated corporate activities with a possible listing in the years to come,'' Kokshoorn said.
The company, established 10 years ago, has seen its annual turnover grow to nearly RM300mil. Kokshoorn said the company had maintained an “unbroken profit track record''.
The Merbok group, which has two mills in Malaysia and a third in Sri Lanka, is one of Asia's top producers of medium density boards (MDF). Its annual manufacturing capacity is around 540,000 cu m.
The Penang-based company's total output accounts for about 26% of the country's annual MDF production.
MDF is widely used in the furniture industry as a substitute for solid wood and plywood.
Merbok's production is skewed towards the export market, with China and the Middle East being its largest markets, accounting for 20% and 40% of total output respectively.