KUALA LUMPUR: Malaysia has successfully priced the world's first sovereign US dollar sustainability sukuk, via the issuance of US$800 million 10-year Trust Certificates.
The government also successfully issued US$500 million 30-year Trust Certificates.
Investors' confidence was clearly reflected in the offering being oversubscribed by 6.4 times, according to the Finance Ministry (MoF).
"Due to the overwhelming demand, the goverment decided to upsize the initial target size of US$1.0 billion to US$1.3 billion.
"The strong demand has also resulted in the lowest ever yield and spread for a US-dollar sukuk issuance by Malaysia, with the 10-year and 30-year Trust Certificates priced at 2.070 per cent (T + 50 basis points) and 3.075 per cent (T + 80 basis points) respectively," the MoF said today.
More importantly, the MoF said this demonstrated the market's confidence in Malaysia's economic recovery and growth prospects, despite a challenging past year due to the Covid-19 pandemic.
Both tranches have been assigned a rating of A3 by Moody's Investors Service and A- by S&P Global Ratings.
Malaysia's maiden sustainability sukuk is the world's first US dollar sustainability sukuk issued by a sovereign.
The proceeds will be used for eligible social and green projects aligned to the United Nation's Sustainable Development Goals (SDG) Agenda.
"This will enable Malaysia to not only meet its commitments as a responsible nation and signatory to the Paris Agreement, but also further its efforts to advance its people's socio-economic well-being," the MoF said.
"It is also a testament to the government's efforts in combating climate change as well as accelerating the transition towards a more resilient and inclusive economy, in line with the government's Shared Prosperity Vision 2030."
The MoF said the sukuk was also unique as its underlying assets were sustainable assets, being vouchers representing travel entitlement on Malaysia's Light Rail Transit, Mass Rapid Transit and KL Monorail networks.
As the first sovereign issuance with such assets in a sukuk structure, the issuance sets a new benchmark and showcases Malaysia's global leadership in Islamic finance,
This reinforced the country's position as the world's largest sukuk market, Finance Minister Tengku Datuk Seri Zafrul Aziz said.
"We are extremely pleased and honoured by the investors' vote of confidence in our maiden sustainability sukuk issuance, which also reflects their belief in Malaysia's strong economic fundamentals and solid prospects for growth.
"The issuance is not only a global first on many fronts, but also a strong recognition of Malaysia's Islamic finance industry's innovative capabilities in structuring sukuk to help advance Malaysia's SDG-focused policies towards achieving our Shared Prosperity Vision 2030."
The sukuk is issued via a special purpose vehicle, Malaysia Wakala Sukuk Bhd, and based on Malaysia's newly-established The Government of Malaysia SDG Sukuk Framework.
Subsequent to a virtual roadshow covering Asia, the Middle East, Europe and the US, the sukuk attracted a diverse group of investors.
The allocation was well-spread globally, with 55 per cent of the principal amount of the 10-year sukuk distributed to investors in Asia, 33 per cent to Europe, Middle-East and Africa (EMEA) and 12 per cent to the US.
Forty-six per cent of the principal amount of the 30-year sukuk was distributed to investors in Asia, 33 per cent to EMEA and 21 per cent to the United States.
By investor type, the distribution of the 10-year tranche was 67 per cent to fund managers and insurance companies, 18 per cent to central banks and governments, 14 per cent to banks and one per cent to others investors.
For the 30-year tranche, 83 per cent was to fund managers, 10 per cent to banks, four per cent to central banks and governments, and three per cent to other investors.
CIMB, HSBC and J.P. Morgan acted as the joint bookrunners and joint lead managers.
HSBC Amanah Malaysia and J.P. Morgan were the joint SDG structuring agents.