Khazanah’s RM100m sustainable Sukuk priced at 4.3%

KUALA LUMPUR: Khazanah Nasional Bhd’s RM100mil seven-year sustainable and responsible investment Sukuk was fully subscribed and it was priced at 4.3% per annum.

It said on Thursday the Sukuk would be issued via a Malaysian incorporated independent special purpose vehicle, Ihsan Sukuk Bhd. This issuance was under Ihsan’s RM1bil Sukuk programme, the first of its kind approved under the Securities Commission's Sustainable and Responsible Investment Sukuk framework. 

Khazanah said a diverse investor group including foundation, corporations, banks, pension fund and asset management companies subscribed for the Sukuk.

“The inaugural issuance proceeds will be used to fund schools under the Yayasan AMIR Trust School Programme identified for 2015,” it said. 

Yayasan AMIR is a not-for-profit foundation incorporated by Khazanah to improve accessibility of quality education in Malaysian Government schools through a Public-Private Partnership with the Ministry of Education.

The Sukuk was launched by the Deputy Prime Minister and Education Minister, Tan Sri Muhyiddin Mohd Yassin on May 18.

 

Khazanah managing director, Tan Sri Azman Mokhtare said the issuance of the Sukuk combines the education and Islamic finance sectors along with socially responsible investments through an innovative structure -- demonstrating impact investing at its best, whilst being executed at competitive rates. 

“The social impact sukuk is a new and powerful concept and investor awareness and responsiveness will increase further over time. It's a modest but good start,” he said.

Securities Commission chairman Datuk Ranjit Ajit Singh said this first-ever Sustainable and Responsible Investment Sukuk issued by Ihsan marked another milestone in product innovation from Malaysia in the Islamic capital market. 

“This achievement also reinforces the universality of the value proposition of Islamic finance,” he said. 

The social impact of this “Pay-for-Success” structure is measured using a set of predetermined Key Performance Indicators (“KPIs”) which are assessed over a five-year observation timeframe. 

If at maturity the KPIs are fully met, Sukukholders will forgo or contribute up to 6.22% of the nominal value due under the Sukuk, which in effect will reduce the yield to 3.5% per annum. 

The adjustment is considered as part of Sukukholders’ social obligation in recognizing the positive social impact generated by the Trust School Programme. If KPIs are not or partially not met, Sukukholders will receive up to the nominal value due under the Sukuk as agreed at issuance.

Another unique feature of this Sukuk is that it allows Sukukholders to convert their investment in the Sukuk into a donation at any point during the tenure. 

The structure is in accordance with the Islamic principle of Wakalah bil Istithmar, which further attests Khazanah’s continued effort to push the envelope on transaction innovation and the positioning for Islamic structures. 

CIMB Investment Bank Bhd is the sole lead arranger and sole lead manager, and Amanie Advisors Sdn Bhd and CIMB Islamic Bank Bhd are the joint Shariah advisors for the deal.