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Thursday, 21 May 2015

Khazanah to roll out first tranche of RM1b SRI sukuk

Khazanah Nasional Bhd will be rolling out the first tranche of RM100mil of its RM1bil sustainable and responsible investment sukuk (SRI sukuk) this year.
“We are looking at RM100mil to start with, but with an upside of RM150mil,” said Khazanah board of director and Yayasan AMIR chairman Raja Tan Sri Arshad Raja Tun Uda after the launch of the SRI sukuk yesterday.
The sukuk programme is the first of its kind and has been issued a preliminary AAArating by RAM Ratings Sdn Bhd.
The proceeds of the issuance will be channeled to Yayasan AMIR, a non-profit organisation initiated by Khazanah in 2010, to manage its cashflow for the deployment of the Trust Schools Programme for schools identified in 2015.
The first issuance will be used to roll out 20 schools under the Trust Schools Programme, in Kuala Lumpur, Johor and Sarawak.
Khazanah executive director and chief financial officer Mohd Izani Ghani targets to price the sukuk by mid-next week.
“Indicatively now, we are thinking of MGS (Malaysian Government Securities) seven-year plus 50 basis points, so indicatively 4.3%.
“Because of the uniqueness of the structure we are allowing some time for investors out there to go and seek approval,” said Izani.
Khazanah has already met a group of investors, including some financial institutions and foundations, as well as asset management companies.
“Generally they are all interested in giving back to society. It is a matter of time when they have to present to the committee for the investment,” he said.
He added that the SRI sukuk was dedicated for education only.
“At the beginning of every year, there’ll be an issuance for the schools roll out in that particular year.
“The structure is unique that can be applicable for any other initiatives, like affordable housing, healthcare, environment. It’s out there for people to adopt and use the structure that we have created,” he said.
The SRI sukuk has several key performance indicators, which will affect the returns from the sukuk investment.
“If the KPIs (key performance indicators) are not met, investors will get normal returns as per the launch date.
“If the KPIs are met, there is a mandatory step down in the yield, ie when the KPIs are met you are happy with gifting away the returns,” he said.
The “step-down” could range from 80 to 100 basis points, he added.
“We will sum up the final yield when we price the sukuk hopefully by mid next week,” said Izani.
Another feature of the SRI sukuk is that investors can decide to waive their principal anytime from the first day of the investment up to the seven years of the sukuk.
“If you feel that the KPIs are met and you feel like you want to give, just give notice to Khazanah, and we will manage the redemption at nominal value of RM1 and that’s effectively giving to the trust schools,” he said.
The investor will be granted a tax exemption by the Finance Ministry if the principal is waived.
Some of the KPIs include expansion of the trust schools, upskilling and training teachers as well as senior leaders of the schools, among others.
(The Star Online / 19 May 2015)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
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Islamic Investment Malaysia: www.islamic-invest-malaysia.com

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