Government-backed 1MDB Global Investments due to issue US$3 billion Sukuk (By IFN)

Government-backed 1MDB Global Investments due to issue US$3 billion Sukuk

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MALAYSIA: 1Malaysia Development (1MDB), an investment arm of the Malaysian government, will issue a US$3 billion Sukuk via its SPV, the 1MDB Global Investments (1MDB GI), to fund a 50:50 joint venture between 1MDB and Aabar Investments; which is wholly-owned by the government of Abu Dhabi. The entity, dubbed the Abu Dhabi Malaysia Investment Company, will invest in various projects “for the strategic interest” of Malaysia and Abu Dhabi. 1MDB GI is an SPV set up by 1MDB — a Malaysian government initiative to transform Malaysia into a high income economy — in the British Virgin Islands. The Malaysian government has explicitly expressed its intentions to financially support the payments of the notes and is legally obligated to ensure full and timely payments by the issuer. Global rating agency S&P has assigned an ‘A-‘ rating to the issuance, which is due in 2023, alongside an ‘axAAA’ ASEAN regional scale rating on the notes. According to S&P, the rating is based on the government of Malaysia’s willingness to support the payment obligations of 1MDB GI under the notes. Despite the current political uncertainty in Malaysia, in light of the upcoming 13th General Elections, analysts at S&P have clarified with Islamic Finance news that the rating on the upcoming notes have exempted any political connotations and is based solely on the credit quality of the Malaysian government and the country’s sovereign rating.