AmIslamic Bank to issue first Basel III-compliant sukuk

AmIslamic Bank on February 11 obtained approval from the Securities Commission Malaysia to establish a subordinated sukuk murabaha programme of up to 3 billion ringgit (US$903.60 million), which would represent the first Basel III-compliant sukuk in Malaysia.


This comes following a similar approval granted to AmIslamic by Bank Negara Malaysia in October 2013. The programme is structured in accordance with the central adequacy framework for Islamic banks issued by Bank Negara in November 2012, and the subordinated sukuk murabaha issued from time to time thereunder will qualify as tier 2 capital of AmIslamic.


Under the programme, AmIslamic is given the flexibility to issue subordinated sukuk murabaha during the availability period of the programme based on the bank's funding requirements. AmIslamic is a wholly-owned subsidiary of AMMB Holdings.


"With Basel III regulation on capital components coming into effect early last year, we expect more issuances of Basel III-compliant sukuk in the Malaysian debt capital market," says Wong Yin Ching, co-head of financial institutions ratings at RAM Ratings.


Malaysia's conventional banks have already started issuing Basel III-compliant bonds with CIMB and Public Bank printing 750 million ringgit and one billion ringgit tier 2 subordinated debts in September 2013.


The AmIslamic programme has a tenor of up to 30 years from the date of the first issuance of the subordinated sukuk murabaha. Each tranche to be issued shall have a tenor of at least three years, subject to their maturing on or before the expiry of the programme.


AmIslamic's sukuk murabaha is rated AA3 by RAM, or one notch below the bank's long-term financial institution rating - underlining their lower ranking in the priority of claims upon bankruptcy or liquidation, relative to senior unsecured creditors


AmInvestment Bank is the principal adviser, lead arranger, lead manager and Shariah adviser (backed by AmIslamic Shariah committee), on a joint role basis with Amanie Advisors for the programme,