Winner: Khazanah’s $550 million exchangeable sukuk
Malaysian state-investment company Khazanah had already impressed the market with its first groundbreaking sukuk transaction in 2006. In March 2008, its third such deal pushed the boundaries of the Islamic debt capital market even further with a $550 million exchangeable sukuk that featured a number of innovations.
The deal, via Paka Capital, was the first exchangeable sukuk structured with a stock borrow mechanism to facilitate delta hedging for arbitrage equity-linked investors.
It was the first exchangeable sukuk issued with a concurrent equity offering – as well as the $550 million exchangeable trust certificates, Khazanah monetized its residual holding in Malaysian department store Parkson Retail via a $97 million equity offering.
The deal also achieved the best pricing by an Asian borrower in 2008, issued at a record Libor swap minus 220 basis points. Unlike the previous two Islamic exchangeable sukuks issued by Khazanah, the deal was launched overnight with bookbuilding done on an accelerated basis. The books closed three hours after opening with a record oversubscription rate of 10 times.
About 50% of the transaction was placed in the Middle East, bought by dedicated regional and Islamic accounts. Just over a quarter was bought by European investors and 13% went to Asia funds. US offshore accounted for 11%. Absolute return investors were also big buyers of the transaction.
