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GLOBAL: Following its
benchmark international Sukuk offering last year, and two other US dollar
Islamic issuance in 2011 and 2010 respectively, Kuveyt Turk Katilim Bankasi
– a subsidiary of Kuwait Finance House (KFH) – has once again tapped the
Islamic capital markets but this time in Malaysia.
The participation bank’s latest five-year Sukuk deal raised RM300 million
(US$84.29 million) and forms the inaugural tranche of the bank’s RM2
billion (US$561.94 million) Islamic bond program in Malaysia. According to
Emad Al Monayea, the CEO and board director of KFH Investment Company, the
transaction is the lowest-cost ringgit Sukuk realized by a Turkish company
and is also the first asset-backed Islamic bond from a Turkish issuer to be
traded in the secondary markets on an interest-free basis in Malaysia.
Given Malaysia’s standing as the world’s largest Sukuk market which boasts
a conducive regulatory and taxation environment, it is no surprise that
foreign issuers are gravitating towards the Southeast Asian nation in their
efforts to diversify their funding. This is further buoyed by the strong
demand for ringgit debt by domestic investors. Turkey in particular broke
into the Malaysian market when Turkiye Finans established a RM3 billion
(US$842.9 million) Sukuk program under which it sold its first tranche of
RM800 million (US$224.7 million) last year (see Case Study Vol 11 Issue 43:
‘Turkiye Finans’s Malaysian Sukuk debut’).
Paying a yearly yield of 5.8%, Kuveyt Turk’s debut Malaysian facility
effectively lowers the bank’s funding costs in US dollars to 4.4% as
ringgit raised are swapped into US dollars on the day the Sukuk is issued;
and will be used for foreign trade and financial leasing activities along
with other funding needs.
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