Tuesday, January 8, 2013

Danainfra to issue RM1.5b sukuk by mid-November

by Habhajan Singh

Danainfra Nasional Bhd is finalising plans to issue a RM1.5 billion sukuk tranche by mid-November to finance the Sungai Buloh-Kajang (SBK) mass rapid transit (MRT) line, with one portion to be marketed as retail bond as mooted in Federal Budget 2013.

The issuance, part of the RM8 billion Islamic commercial papers/Islamic medium-term notes (ICP/IMTN) programme signed in early July, will see one fifth of it, or RM300 million, being floated as retail bond, said officials involved in the issuance.

"This is an opportunity to widen the investor base for the MRT project. However, should retailers fall short, we expect the corporates to snap up the retail bond portion," said Danainfra principal officer Fazlur Rahman Ebrahim [pix, below: Courtesy: Utusan].

Danainfra, a Ministry of Finance Incorporated (MOF) unit, was formed in June 2010 as an infrastructure finance entity (IFE) to help finance the country's biggest construction project. One of its key tasks would be to raise funds in the most efficient manner, both in terms of pricing and structure, for the mammoth MRT project now underway.

In his Federal Budget 2013 speech on Sept 28, Prime Minister Datuk Seri Mohd Najib Razak, who is also the finance minister, proposed that Danainfra will issue a RM300 million retail bond by end-2012 to finance MRT development projects.

"Apart from institutional investors, the government also encourages retail investors to participate in the capital market. For this purpose, the SC has formulated a framework for retail bond and sukuk issuances to enable investors to acquire stakes in the bond and sukuk markets," Najib said in his speech.

To encourage companies to issue retail bonds and retail sukuk, the Prime Minster said the government was proposing that additional expenses incurred in the issuance of retail bonds and retail sukuk be given a double deduction for a period of four years effective from the year of assessment 2012 to 2015.

At the same time, individual investors are also given stamp duty exemption on instruments relating to the transactions of retail bonds and retail sukuk, Najib said.

The latest RM1.5 billion issuance comes after an earlier RM2.4 billion sukuk from Danainfra for the MRT project, which had included RM1 billion as a bridging loan.

On the preparation to issue the retail bond, Fazlur said Danainfra was finalising the necessary documentation and framework.

"There is a debate on the size for the retail bond. Should it be RM1 million, or lower? These are some of the issues being ironed out," Fazlur said.

The Securities Commission (SC) had earlier paved the way for the issuance of retail bonds when it announced on Sept 6 on Danainfra's plan to venture into retail bonds.

On the framework, SC said it enables retail bonds and sukuk to be issued and traded either on the exchange (Bursa Malaysia) or over-the-counter (OTC) via appointed banks.

During the introductory phase, the SC statement noted that retail investors would be able to invest in bonds and sukuk issued or guaranteed by the Malaysian government.

The Danainfra issuance would be one of them as the RM8 billion programme is government guarateed.

[The Malaysian Reserve, 3 Oct 2012]