MALAYSIA (March 16, 2012): Khazanah Nasional Bhd said yesterday it sold US$357.8 million (RM1.09 billion) worth of exchangeable sukuk at negative yield, a first for this type of asset class.
It is also the first convertible debt paper to be issued in two years.
The seven-year Islamic paper comes with a year-three put option and zero periodic payment. It was priced to pay a yield of negative 0.25% with a 30% conversion premium – both at the issuer-friendly end of marketed terms.
The benchmark sukuk can be exchanged for shares of Parkson Retail Group Ltd, one of the largest department store operators in China in which Khazanah has a substantial stake.
A convertible debt paper provides investors exposure to undervalued stock, but with downside protection.
The negative yield means investors were willing to pay to participate in this deal, which reflected their confidence in Khazanah's credit standing. It also indicated their positive outlook on Parkson Retail's growth prospects.
Khazanah said the sukuk was successfully priced through an accelerated book-building process on March 14.
"The transaction drew a demand of 3.4 times book size, attracting a diverse group of over 100 investors comprising long-only funds, hedge funds, arbitrage funds as well as asset managers across Asia and Europe,'' it said in a statement yesterday.
The sukuk issue also reopened the Malaysian equity-linked market, as being the first Malaysian equity-linked transaction to be launched since early 2010.
"It is yet another milestone for Islamic finance and supports Malaysia International Islamic Financial Centre's initiative to promote Malaysia as a major hub for international Islamic finance,'' Khazanah said.
CIMB Investment Bank Bhd, Deutsche Bank and J.P. Morgan are the joint bookrunners and joint lead managers for the transaction.
"We are very pleased that this issuance has been executed at a very competitive price, setting a benchmark for sukuk issuance while the orderbook in excess of three times the issue size, underlines the market's strong confidence in Khazanah's credit," Khazanah managing director Tan Sri Azman Mokhtar said.
Parkson Retail is listed on the Stock Exchange of Hong Kong. The stock was last traded at HK$9.33 yesterday, or about 16 times its projected earnings.