Issuer: Khazanah Global Sukuk
Obligor: Khazanah Nasional
Size: $750 million
Structure: Sukuk wakalah
Tenor: Five years
Banks: BofA Securities, CIMB, DBS Bank, JPMorgan, Maybank, MUFG and OCBC Bank (joint lead managers and joint bookrunners)
Date: May 2023
As far as debuts in the international sukuk and bond markets go, the $750 million five-year sukuk from Malaysia’s sovereign wealth fund in May last year couldn’t have gone much better.
The transaction, part of a $1.5 billion financing that included a $750 million 10-year bond, was a blowout success, with $11 billion-worth of investor orders being placed for the dual-tranche deal that was the fund’s first international issue in two years and the first to be rated.
Such high demand enabled the banks to shave more than 40 basis points from initial guidance on both tranches, pricing the sukuk at 93bp over Treasuries, paying a coupon of 4.687%. The conventional bond priced at 118bp over Treasuries, paying a coupon of 4.876%.
Khazanah not only re-priced its curve but set a new benchmark in the market, underscoring its recognition as Euromoney’s best sukuk deal in Asia last year.
In the end, the sukuk drew investor orders of $3.9 billion from across 216 accounts, 74% of which were fund managers, with the rest being insurers, pension funds, other sovereign wealth funds and banks. Buyers in Asia Pacific dominated the distribution (73%), with about a quarter sold to investors in Europe, the Middle East and Africa, and the rest to US offshore accounts.
Undoubtedly influential in its success was Khazanah securing its first credit ratings – A3/A- – from Moody’s Investor Service and S&P Global
Undoubtedly influential in its success was Khazanah securing its first credit ratings – A3/A- – from Moody’s Investor Service and S&P Global in late April, a development with two clear impacts: opening-up Khazanah to a far larger universe of global institutional investors compared with being unrated; and greater liquidity thanks to its bonds and sukuk being included on relevant indices.
In a statement at the time of the deal, Dato’ Amirul Feisal Wan Zahir, Khazanah’s managing director, said that the strength and widespread reception of its first-ever rated sukuk and bond was a good indication of investors’ confidence in the fund’s creditworthiness and long-term strategy.
“Investors accept and understand that Khazanah is a strategic investor and an intergenerational fund that can withstand short-term volatility,” he said. “The issuance, carried out amidst volatile market conditions, will be the benchmark for Khazanah’s credit as we continue to rebalance our portfolio and strengthen our balance sheet as part of our strategy in advancing the country.”
The sukuk is structured based on the shariah principle of wakalah, where the underlying assets comprise investment in shariah-compliant shares and commodity-murabaha investment. It was issued under a new $5 billion multi-currency sukuk programme, with proceeds from the May issue intended to be used to fund shariah-compliant investments and/or refinance debt.
