Cagamas prices innovative sukuk offering
Malaysia’s national mortgage corporation, Cagamas, on March 28 announced that it has successfully issued a multi-tenured 500 million ringgit (USD167 million) sukuk wakala bil istithmar, representing the first of its kind in the country.
The innovative offering is expected to broaden and diversify Cagamas’ investor base by enhancing the secondary market liquidity of its sukuk through the increased participation of Shariah compliant investors, who would normally hold sukuk, which is deemed as debt instrument until maturity.
The uniqueness of the sukuk wakala structure arises from the co-mingling of debts – arising from a commodity murabaha transaction – with equity assets constituting an investment (istithmar) portfolio, which meets the standards of the Accounting and Auditing Organization for Islamic Financial Institutions.
Hence, the sukuk wakala is deemed an investment instrument tradable at any price in the secondary market.
The sukuk wakala, which was drawn from Cagamas’ 60 billion ringgit commercial paper and medium-term note programme, was priced at competitive yields of 3.35 percent for one year, 3.50 percent for three years and 3.70 percent for five years.
The inaugural issuance of sukuk wakala widens the investment options available to Shariah compliant investors and reaffirms Cagamas’ commitment to promoting the development of the Malaysian capital markets and Malaysia as a premier global Islamic financial centre.
AmInvestment Bank and RHB Investment Bank are the joint lead managers for the transaction.
Since incorporation in 1986, Cagamas has cumulatively issued 251.04 billion ringgit of conventional and Islamic debt securities. It has been at the forefront in pushing for innovation in the Islamic bond market, having introduced in 2010 the benchmark-setting sukuk al-amana li al-istithmar (sukuk ALIm). This first-of-its-kind structure precludes the principles of ina (sale and buy back), bai’ dayn (debt trading) and wa’ad (undertaking), and appeals to a wider range of investors, particularly from the Middle East. It is hailed as a catalyst for more products that can meet the demand of global Islamic finance participants.