MALAYSIA’s sovereign wealth fund, Khazanah Nasional, on January 18 announced it has raised US$320.8 million through a sukuk exchangeable into H-shares of China’s largest securities brokerage firm CITIC Securities Company.

The five-year exchangeable sukuk has an investor put option exercisable at the end of year three. Executed through an accelerated book building process, the deal was structured with a zero periodic payment and 0% yield-to-maturity. It was priced at the tightest end of the initial price guidance with an exchange premium of 40% above the volume weighted average price of CITIC Securities’ shares on January 17.

The transaction was fully covered shortly after launch and garnered a final demand of 5.5x book size. It drew orders from 78 investors, comprising long-only funds, hedge funds, arbitrage funds as well as asset managers from Asia and Europe.

Khazanah managing director Azman Mokhtar says the strong demand for exchangeable sukuk underscores the investors’ confidence in Khazanah’s creditworthiness. “It was opportune for us to successfully price the deal on the back of positive market sentiments in China and Hong Kong,” he adds.

The sukuk, issued through an independent special purpose vehicle, Cindai Capital, was structured based on the principle of wakala and provides the sukuk holder with the option to receive cash or shares upon exchange.

CITIC Securities was Khazanah’s eighth offering in an exchangeable sukuk format since the inaugural issue of Telekom Malaysia in 2006.

CIMB and J.P. Morgan acted as the joint bookrunners and lead managers for the transaction.

The last time Khazanah issued an exchangeable sukuk was at the end of August 2016 when it raised US$398.8 million from an issuance of sukuk exchangeable into shares in Beijing Enterprises Water Group, representing the first sukuk to offer exposure into China’s water utility sector.

That deal also has a tenor of five years and featured a 0% yield-to-maturity and an investor put option at the end of year three.