Malaysia’s state-owned investment company, sold 3 billion ringgit ($948 million) of Islamic bonds that drew bids for more than three times the amount on offer, two people familiar with the matter said.
It issued five-, seven- and 10-year notes at yields of 25-29 basis points over the government’s non-Shariah-compliant securities, said the people, who declined to be named as the information is private. The sale attracted 11 billion ringgit in orders, they said.
The offering is the first government-guaranteed Islamic bond this year and comes ahead of state-owned Danainfra Sdn.’s plan to sell 8 billion ringgit of similar notes later this month to fund the construction of a mass railway in Kuala Lumpur. Sukuk issuance by Malaysian companies rose 8 percent in 2012 to 15 billion ringgit from the same period last year, when sales reached a record 75.6 billion ringgit, according to data compiled by Bloomberg.
“For a 3 billion ringgit issue, the take-up is healthy and signals there’s still demand for low-risk bonds,” Michael Chang, who oversees $1 billion as head of fixed income at Kuala Lumpur-based MCIS Zurich Insurance Bhd., said in an interview today. “The spread against Malaysian government bonds is fairly decent considering prevailing market conditions.”
Johor Corp.’s vice-president of corporate services, said in an e-mail today that he would reply to Bloomberg questions later in the day.
Palm Oil Assets
The 400 million ringgit portion due in 2017 was priced at 25 basis points more than similar-maturity government securities, the people said. The 800 million ringgit of seven-year debt was sold at a 28 basis-point premium, while the 1.8 billion ringgit of bonds maturing in 2022 were priced to yield 29 basis points more than government counterparts.
The underlying assets for Johor Corp.’s sukuk, or notes that pay returns to comply with Islam’s ban on interest, will be palm oil contracts and company shares, Kamaruzzaman Abu Kassim, the president and chief executive officer, told reporters on April 12.