Government of Malaysia to come to market with US$1.25 billion Murabahah issuance - IFN

Government of Malaysia to come to market with US$1.25 billion Murabahah issuance

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MALAYSIA: The government of Malaysia will be issuing a Murabahah government investment issue (GII) worth RM4 billion (US$1.25 billion) on the 22nd July 2013. Bank Negara Malaysia (BNM), the country’s central bank will be acting on behalf of the government for the inaugural issuance which will involve the sale of Shariah compliant certificates of indebtedness based on a deferred mark-up sale transaction of an asset; primarily crude palm oil. According to a statement from the central bank, the primary issuances will be conducted through competitive auction through its network of principal dealers which include an array of Malaysian banks and the Malaysian subsidiaries of international banks such as JP Morgan Chase, Citibank, United Overseas Bank and Standard Chartered. The statement further read: “Secondary trading of GII will be based on Bay Al-Dayn concept where it involves buying and selling of the securities issued by the Government of Malaysia as evidence of indebtedness.” The tender, which opens today, the 17th July and closes on the 19th July, will be based on yield, and the maturity date for the papers has been set for the 22nd July 2016. The structure of the issuance will see BNM acting as the agent to buy the commodities from a broker, and selling them over to the Government of Malaysia. The central bank will then buy back the commodities and sell them at a profit to the Malaysian government over a staggered period, which will then issue the GII/ MITB papers to investors. Further agreements will involve the Malaysian government electing BNM as an agent to sell the commodities to a buyer at an agreed price. The Islamic principal dealers who have been chosen for the deal include Affin Islamic Bank, AmIslamic Bank, Bank Islam Malaysia, CIMB Islamic, Hong Leong Islamic Bank and Maybank Islamic.