DBK Debut Ringgit Sukuk Issuance Underpins Malaysia as a Global Sukuk Origination Centre

Last Updated : 13 Sep 2012


Another sign of the growing importance of Malaysia as the preferred domicile for Sukuk origination is the recent successful closing of the RM240 million (USD80 million) debut Sukuk Murabaha issuance by the Development Bank of Kazakhstan (DBK), which is 100 per cent owned by the Government of Kazakhstan through the JSC Sovereign Wealth Fund, Samruk-Kazyna.

The issuance, according to DBK, is the first Sukuk to be issued out of the Commonwealth of Independent States (CIS), which include the six Muslim central Asian republics, and the first from the region to tap the ringgit market.

In a statement, Zhaslan Madiyev, Managing Director and Member of DBK's Management Board, emphasised that "DBK is extremely proud and honoured to have become first issuer from the CIS to structure and successfully launch an Islamic Sukuk transaction under Shariah-compliant principles. This process is a culmination of a significant effort by the Government of Kazakhstan, DBK and the lead managers to promote our credit story in Malaysia, and to raise Kazakhstan's profile amongst the Islamic investor community. We strongly believe that the completion of this placement will pave the way for other issuers from the region to diversify their funding into Islamic markets".

HSBC Amanah Malaysia Berhad and The Royal Bank of Scotland acted as Joint Lead Arrangers/Managers and Bookrunners for the transaction, while Halyk Finance from Kazakhstan, AmInvestment Bank and Kuwait Finance House (Malaysia) Berhad acted as Joint Lead Managers of the issue, which is listed on the Kazakhstan Stock Exchange (KASE), the first Sukuk to be listed on the said bourse.

The 5-year Sukuk was successfully priced with an annual coupon of 5.50 per cent and comes under DBK’s RM1,500 million (USD500 million) Islamic Medium Term Note Programme (IMTN Programme) which is structured under the Murabaha principle and which uses commodities as underlying assets. The IMTN Programme was approved by Bank Negara Malaysia and the Securities Commission of Malaysia.

The issuance, after a series of investor meetings in Kuala Lumpur and Almaty, was launched at par during an intra-day accelerated book-build process. The final order-book, according to DBK, stood at RM320 million (USD106.67 million) with 70 per cent of the issue allocated to Malaysian investors and the rest to the Kazakhstan market.

The Sukuk was rated AA2 by RAM Rating Services Berhad and BBB+ by Standard & Poor’s (S&P) Rating Services. The Sukuk is due to mature in 2017 and has a re-offer yield and coupon of 5.50 per cent. The applicable law for the transaction is Malaysian law.

According to Timur Omarov, Head of Financial Education at the National Bank of Kazakhstan, the central bank, the decision for DBK to raise funds from the Malaysian market was finalised during the visit of President Nursultan Nazarbayev of Kazakhstan to Malaysia in April 2012 where he had discussions with Malaysian Prime Minister Mohd Najib Abdul Razak.