Thursday January 27, 2011
PAAB Islamic notes upsized on strong demand
By SHARIDAN M. ALI
KUALA LUMPUR: Pengurusan Aset Air Bhd (PAAB) issuance of Islamic medium-notes was successfully priced and upsized to RM2.7bil from RM2.5bil due to strong demand from investors.
These are issued under its RM20bil nominal value sukuk programme guaranteed by the Government.
The sukuk, carries a semi-annual profit rate of 3.64% per annum for the three-year tranche, 3.92% per annum for the five-year tranche and 4.43% per annum for the 10-year tranche.
Offered through a book-building process, the initial orders received when books opened reached RM7.1bil and grew to a high of RM10.4bil during the two-day book-building period which represents a bid-to-cover ratio of 4.16 times on the initial deal size of RM2.5bil.
Due to an overwhelming response from investors, the deal was upsized to RM2.7bil. It was priced at the tightest end of the final price guidance which demonstrated strong investor appetite and ample liquidity in the market for high-grade papers.
Historically, PAAB has issued sukuk that commanded good pricing due to the implicit government support and PAAB's role in the nation's water restructuring exercise.
A broad range of investors participated in the offering including government agencies, financial institutions, fund managers, insurance companies, corporate accounts and offshore investors.
However, PAAB did not mention how it would use the proceeds.
But, a source close familiar with matter told Starbiz, the initial “proceeds” might be used for payments of the company's earlier sukuk issuance due early next month.
However, the source did not reveal the amount needed to be paid.
The pricing is done via PAAB wholly-owned subsidiary, Pengurusan Air SPV Bhd (PASB)
PAAB chief executive officer Datuk Ahmad Faizal Abdul Rahman said PAAB was very pleased with this successful outcome and would like to thank the Ministry of Finance, CIMB and HSBC as joint lead arrangers and all parties who participated in this transaction for all their efforts in coordinating a well executed issuance strategy.
“PAAB is also pleased to tap the capital markets and look forward to further financing opportunities in future,” he said.
Meanwhile, CIMB and HSBC said they were honoured to be part of this landmark transaction.
Both banks said the success could be attributed to a well-coordinated execution strategy, market timing and continued investor confidence in the ringgit sukuk market.
It had taken over the water assets in Melaka, Negri Sembilan and Johor, for a total of RM6.12bil.