The IDB, according to Mohamed Tariq, senior adviser to
the President Ahmad Mohamed Ali, was poised to go to the international
financial markets in September this year to raise in excess of $850 million in
a sukuk issuance under its $3.5 billion MTN Program. September will be a
difficult month because it coincides with the end of the holy month of fasting,
Ramadan, and the subsequent Eid holidays.
In Kuala Lumpur last week, Abdul Aziz Al-Hinai, vice
president, finance, IDB, confirmed that the IDB plans to go to the market in
the last quarter of 2010 to raise $1 billion through a sukuk issuance of 5, 7
and 10-year tenors and which would be listed on the London Stock Exchange and
the Bursa Malaysia.
Another sign that the IDB is gearing up to an issuance is
the reaffirmation on Aug. 25 by international ratings agency, Fitch Ratings of
its AAA, the rating of the IDB Trust Service Limited's $3.5 billion MTN Program
which benefits from a liquidity facility provided by the IDB. The rating
affirmation follows the IDB's announcement that it has increased the ceiling of
the program to $3.5 billion from $1.5 billion in August. The program's rating
is supported by the IDB's long-term issuer default rating (IDR) of AAA with a
stable outlook.
Another international rating agency, Moody's Investors
Service, last month had already reaffirmed for a fifth consecutive year the
Islamic Development Bank's Aaa long term and P-1 short term foreign currency
issuer rating with a stable outlook.
Moody's stated that the IDB's rating is strongly
supported by the commitment of its member countries, and highlighted that the
capital base of the bank is strong, its operational assets continue to perform
well, it has a high level of liquidity and very low level of debt. Moody's
concluded that the bank's risk profile is likely to remain healthy over the
medium term.
At the same time the IDB is looking at a number of
private placements of local currency sukuk even in non-member countries such as
a sterling issue in the UK, or a HK Dollar issue in Hong Kong. The major
challenge is for the productive use of the proceeds of such issuances
especially good projects. The IDB have already successfully issued such local
currency sukuk in Malaysia and in Singapore.
In fact, the IDB last week also listed its local currency
RM1.0 billion Medium Term Note (MTN) Program on Bursa Malaysia. The IDB
launched the above Program in Malaysia in 2008 and issued the first local
currency sukuk of RM400 million under the program on a fixed rate basis for a
5-year tenor. The proceeds raised from the sukuk issued under this MTN Program
will be used for general corporate purposes relating to IDB's business
activities in Malaysia and the region.
The IDB is the first MDB to list its ringgit sukuk MTN
Program on Bursa Malaysia. The rinngit sukuk is also the debut local currency
issuance by the IDB anywhere. The sukuk under the program are issued through
the IDB's special purpose vehicle (SPV), Tadamun Services Berhad. The overall
RM1.0 billion MTN Program has a tenure of 10 years and is rated AAA by Standard
& Poor's, reflecting the institutional rating of the parent, the IDB Group.
Yusli Mohamed Yusoff, chief executive officer of Bursa
Malaysia emphasized at the listing ceremony in Kuala Lumpur that the he would
like to see more issuers to follow the IDB's footsteps "and take advantage
of the opportunities and benefits that Bursa Malaysia can offer for fund
raising activities. There is a growing interest for foreign issuers to list
Shariah financial instruments on the Malaysian market."
The IDB's Ringgit MTN Program is listed under the exempt
regime basis and is therefore not quoted or traded on the exchange. This latest
listing brings the total volume of sukuk programs listed on Bursa Malaysia to
$21.7 billion, comprising 16 sukuk listed by 14 issuers, of which three are
foreign issuers.
Al-Hinai emphasized "The listing of the IDB's MTN
Program on Bursa Malaysia is a testament of our commitment to support the
Islamic finance market, in this case, the Islamic debt capital market in
Malaysia."
Badlisyah Abdul Ghani, executive director and chief
executive officer, CIMB Islamic Bank, the listing adviser to the IDB MTN
Program, is confident that more issuers will list their sukuk on Bursa
Malaysia. But he also hopes that more foreign issuers would issue sukuk out of
Malaysia, as it has arguably the best capabilities and expertise, backed by the
most comprehensive and sophisticated Islamic debt capital market in the world.
