This article first appeared in The Edge Malaysia Weekly on December 31, 2018 - January 6, 2019
A RM950 million perpetual senior sukuk mudharabah issue by Yinson Holdings Bhd made its mark in 2018 as the first perpetual sukuk by an oil and gas company in Malaysia.
Issued on May 8 under Yinson’s wholly-owned subsidiary, Yinson TMC Sdn Bhd — a treasury management centre set up solely to provide treasury services to Yinson and its subsidiaries — the sukuk mudharabah, with a tenure of perpetual non-call 15 years, is unprecedented. It has by far the longest “non-call period” for a perpetual issuance in either the bond or sukuk format in Malaysia.
This sukuk is deemed the best non-IPO fundraising under the bond or sukuk category primarily because of its profit rate of 6.8% per annum — one of the highest among all the nominated bond and sukuk issues.
Maybank Investment Bank and AmInvestment Bank were the joint principal advisers, lead arrangers and lead managers for the issue.
While ringgit perpetual sukuk issues are typically structured based on the musharakah and wakalah bi al-istithmar principles, this sukuk stands out as the first perpetual sukuk to be structured on the mudharabah principle.
The sukuk mudharabah programme was the first of its kind, allowing the issuer to issue senior and subordinated ranking perpetual sukuk at the issuer’s discretion, according to Maybank IB.
The RM950 million sukuk will be used to refinance outstanding financing facilities or debt facilities of the Yinson group. This method of funding will allow Yinson TMC to issue perpetual sukuk with properties of both debt and equity, giving it access to cost-effective ringgit funding that is non-dilutive, compared with traditional equity instruments.
Part of the proceeds will also be used to defray fees, costs and expenses in relation to the issuance and for general corporate purposes such as working capital or capital expenditure for new projects.
For the best non-IPO fundraising through bond or sukuk, Khazanah Nasional Bhd’s US$321 million exchangeable sukuk referenced to CITIC Securities Co Ltd shares deserves a notable mention.
The exchangeable sukuk was issued via Labuan-incorporated independent special-purpose vehicle Cindai Capital Ltd, and will reference the value of H-shares in CITIC Securities, China’s largest securities brokerage firm.
This sukuk has a tenure of five years, with a put option exercisable at the end of Year Three. It is structured with zero periodic payments and 0% yield to maturity with an exchange premium of 40% above the reference share price.
This transaction represents the first-ever exchangeable trust certificate in the world to offer exposure to the financial sector in China and is the only equity-linked transaction to achieve a sizeable exchange premium of 40% in Asia-Pacific ex Japan.
CIMB Investment Bank and JP Morgan were joint bookrunners and lead managers for the issue.
The offering captured a good window as it rose on the recent stock rally in CITIC Securities H-shares as well as the strong momentum in Hong Kong equities.
Impressively, the order book was covered within two hours of the launch. At closing, the book size reached a commendable 5.5 times the issue size. It attracted participation from 78 accounts across a well-diversified investor base that comprised long-only funds, hedge funds and arbitrage funds as well as asset managers across Asia and Europe.
The offering allows Khazanah to efficiently monetise its stake in CITIC Securities at an attractive price and raise zero-coupon financing in an environment where interest rates are rising.
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