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Friday November 9, 2012

20-year sukuk with 4.36% yield sold


KUALA LUMPUR: The Finance Ministry paid a 50 basis-point premium for a 20-year sukuk over non-Islamic sovereign debt, the biggest spread this year for government-guaranteed syariah-compliant notes.

Turus Pesawat Sdn, a company set up to sell the securities that will fund aircraft purchases on behalf of loss-making carrier Malaysian Airlined, sold RM3.4bil of debt in total, said two people familiar with the deal who declined to be named because the details are

private. The RM1.65bil portion of 2032 notes yielded 4.36%, the top end of the 40 basis-point to 50 basis-point guidance, they said.

“The higher pricing reflects the lower risk-appetite for the aviation business, which is very volatile, as well as the increase in supply of sukuk,” Michael Chang, who oversees US$1bil as head of fixed-income at MCIS Zurich Insurance Bhd, said in an interview yesterday. “Fifty basis points for a low-risk government-guaranteed paper is attractive, and is definitely worth holding.”

Falling yields on Islamic bonds have spurred a surge in issuance this year in the world’s biggest market for the debt. Sales more than doubled to a record RM84bil from RM35.4bil in the same period in 2011, according to data compiled by Bloomberg.

Turus Pesawat’s offering of sukuk, which pay returns on assets to comply with Islam’s ban on interest, is part of a RM5.3bil 20-year programme.

The company also sold RM500mil each of 10- and 12-year syariah debt yesterday at yields of 3.74% and 3.93%, representing premiums of 30 basis points and 40 basis points,. It issued RM750mil of 15-year notes at 4.12%, a 45 basis-point spread, they said. A basis point is 0.01 percentage point.

MAS sold RM1bil of Islamic bonds with no fixed maturity in June via a private placement at a yield of 6.9%. It also issued RM500mil in September at the same rate.

MAS announced in May it planned to lease six Airbus A380s and two A330s from the government for RM5.3bil.

The airline is seeking to win back business from budget carrier AirAsia Bhd by expanding its fleet after reporting losses for six straight quarters through June. – Bloomberg

The sukuk are based on the syariah principle of Murabaha, a three-party transaction where a financial institution buys the goods from the supplier on behalf of the customer and sells them back at a markup. – Bloomberg

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