KUALA LUMPUR: Financial guarantee institution, Danajamin Nasional Bhd, is targeting to provide a further RM3bil in bond guarantees next year.
For the rest of the year, it is evaluating five transactions with guarantees of up to RM1.4bil; since it started providing credit wrapping for bonds in June last year, Danajamin has guaranteed RM2.9bil bonds in 11 transactions in the property, plantation, utility and manufacturing sectors.
“A sustainable target is RM3bil per year,'' CEO Ahmad Zulqarnain Onn told StarBiz.
Danajamin, which was set up primarily to stir the moribund bond market especially for non-AAA papers, targets to provide RM15bil in bond guarantees over the next five years.
“We are trying to increase the breadth and depth of the bond guarantee market,'' said Zulqarnain.
Through different structures and partnerships, Danajamin aims to diversify its coverage to benefit more companies while potentially inviting more participants into the bond guarantee market.
Banks, that had at one stage stopped providing bond guarantees, are now partnering Danajamin. In view of their limit in terms of tenure, banks are covering the shorter tenures while Danajamin takes up the longer end of the guarantee period which can stretch up to 20 years or more.
In June this year, Danajamin and Maybank teamed up to provide co-guarantees for a 15-year RM800mil sukuk issued by Ranhill Power Sdn Bhd; Maybank took the shorter tenure of two to eight years while Danajamin picked up the longer end from nine to 15 years.
“There is more activity now in the bond guarantee market, among the banks with Danajamin and also by themselves,'' said Zulqarnain.
Danajamin has diversified its area of coverage to include, for the first time, a private finance initiative project by TRIplc Ventures Sdn Bhd which received Danajamin's guarantee for its RM240mil 15-year medium-term notes programme.
The funds raised will be used to part-finance the academic facilities and infrastructure of Universiti Teknologi Mara's Puncak Alam campus (phase two) .
Currently, Danajamin is mostly involved in companies with single A rating which still have problems accessing the bond market.
Previously, double A-rated companies used to approach Danajamin for bond guarantees but the market for double A papers has returned, enabling the companies to issue bonds on their own.
“Credit spreads, which is the difference in yields between corporate and government bonds, for double A papers have narrowed so much that it is easier for these companies to issue bonds as the rates are more reasonable now,'' said Zulqarnain.
“But demand for our guarantee from single A-rated companies is very good now. Many of them come to us for help as the credit spread for single A-rated papers is still wide and, therefore, if these companies were to issue on their own, the rates will still be very prohibitive.
“It is encouraging in terms of momentum and impact as these companies can now have access to long-term funding via Danajamin,'' said Zulqarnain.
Within its diversified portfolio, companies in Sabah and Sarawak are also considering bond-raising for funding via Danajamin guarantees.
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