KUALA LUMPUR (Jan 25): UOB Malaysia has established its inaugural Islamic debt programme, under the shariah principle of Wakalah Bi Al-Istithmar, amounting to RM5 billion.

In a press statement on Thursday, UOB Malaysia highlighted that the programme’s debut RM500 million Basel III-compliant Tier 2 subordinated Islamic medium-term note — Tier 2 Sukuk Wakalah — offering was oversubscribed and achieved the tightest spread ever for a Ringgit Tier 2 deal.

The Tier 2 Sukuk Wakalah is due in Feb 2034 and callable in Feb 2029.

UOB Malaysia said that during a book-building exercise, the Islamic debt offering had received “an overwhelming response” from the market and was oversubscribed by approximately 3.39 times.

“The final order book of RM1.7 billion enabled UOB Malaysia to close at a fixed profit rate of 4.01 per cent per annum. At 45 basis points above the benchmark Malaysian Government Securities (MGS), this was the tightest spread ever recorded for a Tier 2 capital instrument in the Ringgit-denominated market to-date,” it said.

UOB Malaysia chief executive officer Ng Wei Wei said the bank is pleased that its first Sukuk offering was well received by the market.

“The oversubscription and the tight pricing achieved reflect investors’ confidence in UOB Malaysia’s solid financial position. The strong demand is also a testament to the liquidity in the local debt capital market and its robustness in supporting local corporates’ financing needs,” she said.

UOB Malaysia pointed out that a diverse group of 42 high-quality investors including insurance companies, fund managers, government-linked investment companies, banks and private banks subscribed to the offering.

“The Tier 2 Sukuk Wakalah received AA1 rating by RAM Rating Services Bhd, underscoring UOB Malaysia’s robust credit profile,” it said.

The issuance is scheduled on Feb 8 this year and is intended to qualify as UOB Malaysia’s Tier 2 Capital on a consolidated basis, adhering to Bank Negara Malaysia's Capital Adequacy Framework for Islamic Banks.

CIMB Investment Bank Bhd and UOB Malaysia acted as joint principal advisers, joint lead arrangers and joint lead managers for this transaction.