CIMB to raise US$2.5bil sukuk

By B.K. SIDHU
CIMB Islamic, the global Islamic banking and finance franchise of the CIMB Banking Group, has 19 mandates from clients in Asia, including the Middle East, to raise nearly US$2.5bil from Islamic capital markets.
It is also set to launch an infrastructure fund worth nearly US$500mil in the region in the next three months.
With equity markets shaken by the global financial crisis, growth segments such as Islamic finance are being tapped globally and Malaysia is seen as a stable place to raise Islamic funds.
“One deal is for a RM5bil sukuk issue and this is for a sovereign-related entity in the Gulf States.
“The other fund-raising is for US$1bil for a multi-currency Islamic bond issue, also by an issuer from the Middle East,” CIMB Islamic chief executive officer Badlisyah Abdul Ghani told StarBiz.
He added that the remainder were predominantly Malaysian and regional mandates.
Badlisyah declined to name the clients for the 19 mandates, merely saying they had good credit ratings to meet investors’ thirst for quality issues.
He expects to launch all the issues this year.
“There is ample demand for quality sukuk issues. Subject to market conditions, we intend to launch them this year in Malaysia, including the RM5bil sukuk and US$1bil multi-currency issues by the foreign entities,” he said.
Last year, CIMB Islamic raised a RM1bil sukuk for the International Development Bank (IDB).
It has been one of the more prolific and successful investment banks in bringing in foreign issuers to tap the Malaysian Islamic debt capital market.
CIMB Islamic also did the World Bank and International Financial Corporation issuances, which set credible benchmark for the market.
In Singapore, together with CIMB-GK Securities, CIMB Islamic raised S$1bil for City Development Ltd (CDL) in Islamic multi-currency medium-term notes, setting in motion the establishment of an indigenous corporate sukuk market in the island state.
Raising funds such as sukuk was part of the firm’s debt origination business, Badlisyah said, adding that CIMB Islamic was the largest issuer of sukuk in the world, commanding about 20% market share.
Badlisyah believed there was a lot of liquidity in the ringgit market and a big appetite for Islamic issues, given the turmoil in equity markets.
He dismissed the notion that oil-rich Middle Eastern countries did not need funding.
“There is a need for funding everywhere, including the Middle East. With a huge liquidity crunch in US dollar bonds, which are their traditional market, many are now looking at alternatives including the ringgit,’’ he said.
Apart from debt origination, CIMB Islamic has been active in the fund management business.
It won awards and accolades for its creative structuring of products in this field, with the latest being the Best Islamic Fund Management House from Asia Asset Management magazine.
CIMB Islamic operates in 10 countries through CIMB Group’s regional offices such as London, Singapore, Brunei and the Middle East.
Asked why Malaysia was favoured over other countries as a issuance hub for Islamic papers, Badlisyah said: “Malaysia is recognised globally as an Islamic finance hub because we have all the necessary infrastructure needed for the industry to operate efficiently and effectively.
“Sukuk issuers always find Malaysia a sound and easy place to issue their Islamic papers. Kudos to the Government for developing and promoting the industry.”
On the infrastructure fund, Badlisyah said: “The seed capital for the fund is from regional and Middle Eastern institutional investors and it will invest in infrastructure projects in Muslim countries in Asia.”
However, he declined to elaborate on the fund but simply quipped: “Just watch this space.”

(The Star, Mar 30, 2009)