AMANIE ISLAMIC FINANCE CONSULTANCY AND EDUCATION LLC

By ELAINE ANG
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KUALA LUMPUR: Cagamas Bhd aims to issue the first tranche of its newly launched Sukuk al-Amanah Li al-Istithmar (Sukuk ALIm) – said to meet the most stringent syariah requirements including those of Middle Eastern investors – worth some RM1bil in a month’s time.

President and chief executive officer Steven Choy said the plan was “to do it within a month but it depends on circumstances and everything falling into place.”

He said the sukuk would initially target investors in the local market, for example, the more discerning investors such as the Middle Eastern banks that had set up operations here as well as Cagamas’ existing sukuk investors before turning towards the Middle Eastern markets.

“We have had some early indications and response has been very good,” he said after the launch of Sukuk ALIm under Cagamas’ RM5bil Islamic commercial paper (ICP) and Islamic medium-term note (IMTN) programmes yesterday.

The ICP and IMNT programmes have a tenure of seven and 30 years respectively and a combined aggregate limit of RM5bil.
From left: Steven Choy, Bank Negara deputy governor Datuk Muhammad Ibrahim, Deputy Finance Minister II Datuk Dr Awang Adek Hussin and The Royal Bank of Scotland country head and managing director Andrew Sill at the launch.

Al Rajhi Bank Malaysia chief executive officer Ahmed Rehman said the bank had been working closely with Cagamas on the sukuk for more than a year.

He added that Sukuk ALIm was tradable in the secondary market and was expected to meet the requirements of a wider range of investors since it precluded certain principles which might be contentious to syariah.

“The significance of this sukuk is that it adheres to the strictest of compliance standards from the Middle East. As a result, it opens up the opportunity to unlock the liquidity that is in the Gulf market.

“Based on such a structure we can approach audiences in the Gulf for flow of funds into Malaysia. However, this is just the start and it has to be developed,” he said.

Sukuk ALIm could set the benchmark for future sukuk issuances particularly those targeting the Middle Eastern markets.

For the sukuk to be tradable, tangible assets must make up at least 50% of the total assets the sukuk represents with the balance made up of financial assets. The tangible assets to be considered will be property based.

The sukuk programmes have been rated AAA or equivalent by Malaysian Rating Corp Bhd (MARC) and RAM Rating Services Bhd.

MARC has also maintained a stable outlook on the ratings.

“The stable outlook on the ratings incorporates Cagamas’ strong financial profile, enhanced risk management as well as the strong support framework in place,” it said in a statement.

RAM Ratings said in a statement that the ratings reflected Cagamas’ systemic importance in the domestic capital markets, robust receivables profile and solid capitalisation.

Al Rajhi Bank together with RHB Investment Bank Bhd have been appointed joint principal advisers and joint lead arrangers for the sukuk programmes.

Al Rajhi Bank and Amanie Business Solutions Sdn Bhd are the syariah advisers.

The joint lead managers are Al Rajhi Bank, RHB Investment Bank and The Royal Bank of Scotland.

In terms of issuance of sukuk, Cagamas Islamic securities represent 24.1% of the total AAA sukuk outstanding of RM13.5bil as at end June 2010.