Malaysia Airports plans RM1bil sukuk

KUALA LUMPUR: The operator of Malaysia’s international airport plans to sell RM1bil of Islamic bonds to finance the construction of a budget terminal that’s costing more than initial estimates.

Malaysia Airports Holdings Bhd (MAHB) was considering selling sukuk without a set maturity to ensure its debt didn’t exceed shareholders’ funds, chief financial officer Faizal Mansor said in an interview from Sepang. The perpetual notes are treated as equity rather than debt on a company’s balance sheet.

Completion of the terminal is lagging behind the March 2012 deadline after work began in 2010. It had been delayed several times as plans became more ambitious, Aireen Omar, chief executive officer of AirAsia Bhd, the nation’s biggest low-cost carrier, said in an e-mailed statement in June. The building must be ready by April 30, 2014, acting Transport Minister Datuk Seri Hishammuddin Hussein told reporters on July 5.

“Originally, the cost for the budget terminal was RM3.1bil, and now, it’s estimated at RM4bil,” Faizal said.

The sale was part of a RM2.5bil Islamic bond programme, said two people familiar with the matter, who asked not to be named as the information was private. MAHB had hired HSBC Holdings Plc, Citigroup Inc, Malayan Banking Bhd and CIMB Group Holdings Bhd to arrange the offering, they added.

The company sold RM600mil of sukuk maturing in 2024 in December at a coupon rate of 4.15%. The notes last yielded 4.2%, prices from Bursa Malaysia show. MAHB’s debt totalled RM3.1bil, according to data compiled by Bloomberg.

“Investors may demand a higher yield, given current challenging market conditions and some concerns over the project delay,” said Michael Chang, head of fixed income at MCIS Zurich Insurance Bhd in Kuala Lumpur. “I would only consider buying when I get more details on the repayment profile.”

The debt is rated AAA, the highest investment grade at RAM Rating Services Bhd, the bigger of the country’s two credit assessors.

Sales of syariah-compliant notes from Malaysian companies dropped 64% in 2013 to RM21.8bil from a year earlier, after reaching an unprecedented RM95.8bil in 2012, data compiled showed. – Bloomberg

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