Malaysia’s Islamic bank MBSB Bank priced on April 4 its inaugural sustainability sukuk offering amounting to 300 million ringgit (US$70.60 million) as part of its continued effort to grow its sustainable assets – underscoring its commitment towards its sustainability agenda. 

The dual-tranche transaction, structured as a wakala contract, comprised of a 200 million ringgit sukuk for five years with a final yield of 4.36% per annum and a 100 million ringgit sukuk for seven years with an annual yield of 4.73%. At these levels, the final pricing represented a spread of 95bp over the Malaysian government securities (MGS).

The deal attracted strong interest from diversified investors throughout the bookbuilding process, allowing MBSB to tighten pricing by 30bp across the two tranches from the high end of the initial price guidance. The final order book amounted to 2.9 billion ringgit with robust demand from institutional accounts, insurance and takaful companies, fund and asset management companies, financial institutions and high net worth investors.

The sukuk was drawn under MBSB Bank’s 5 billion sustainability wakala sukuk programme set up in February this year. The proceeds are earmarked to finance MBSB Bank’s green and social-related projects, which are in line with its strategic plan to actively participate in renewable energy and essential services.

Maybank Investment Bank is the sole lead manager and bookrunner for this transaction as well as the sole principal adviser, sole lead arranger and sole sustainability structuring adviser for the sustainability sukuk wakala programme, with Maybank Islamic Bank acting as the Shariah adviser.

Commenting on the transaction, MBSB Bank’s acting CEO Datuk Nor Azam M Taib says the sukuk demonstrates the bank’s strong commitment towards supporting the government’s sustainability agenda and initiatives.

The sustainability sukuk programme, described as the first of its kind in the world to be issued by an Islamic bank, allows MBSB Bank to continue to grow its sustainable generating assets, including lending to green projects, affordable housing, public health, education, SME financing and to the underserved segments.

Taib adds: “The sustainability label attached to our sukuk offers diversification to investors as we acknowledge there is a growing demand for sustainability sukuk in the market. This enables the bank to have access to a larger pool of investors, including those with dedicated environmental, social and governance (ESG) mandates.”

MBSB Bank’s sustainability wakala sukuk programme is compliant with the relevant sustainability frameworks such as the Securities Commission Malaysia Sustainability and Responsibility Investment Sukuk Framework, the Asean Capital Markets Forum Green, Social and Sustainability Bond Standards, and the International Capital Market Association (ICMA) Green, Social and Sustainability Bond Principles.