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Wed 16 Feb 2011 10:03 PM

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Gulf investment corp launches 600m ringgit sukuk

GIC bond size increased due to strong demand as middle east issuers turn to Malaysia's bond market

Gulf investment corp launches 600m ringgit sukuk
GROWING MARKET: Dubai is working on plans to issue about $1.5bn in sovereign sukuk in Malaysia, while National Bank of Abu Dhabi recently launched $164.2m in 10-year sukuk

Kuwait-based Gulf Investment Corporation (GIC) has sold 600 million ringgit ($196m) of five-year Islamic bonds in Malaysia, one of a growing number of Middle East issuers to tap this market.

GIC sold the bonds at a yield of 5.25 percent

The issue is part of a $1.1bn funding programme that GIC has set up in the Southeast Asian country.

Issuers seeking sharia-compliant funding can tap into an estimated $79bn in excess liquidity in Malaysia, which is also home to the world's largest Islamic bond market.

Dubai is working on plans to issue about $1.5bn in sovereign sukuk in Malaysia, while National Bank of Abu Dhabi, the UAE's largest lender by market value, recently launched $164.2m in 10-year sukuk.

GIC, created to drive private enterprise and economic growth in the Gulf region, had upsized its five-year deal to $197m from $164.2m due to strong demand, said a source with direct knowledge of the deal.

The bonds were oversubscribed by 1.7 times and will be issued on March 1, the source added.

GIC was not immediately available for comment.

RBS is the deal's sole principal adviser and arranger. RBS and Maybank Investment Bank are the joint lead managers.

The fund-raising programme was rated AAA, the highest rating, by Malaysia's RAM Ratings.

The Islamic bonds are structured so that GIC will be appointed as agent to collect and manage the sukuk proceeds for the bondholders.

GIC then appoints itself to manage the sukuk assets and will invest the net proceeds through a commodity murabaha financing arrangement and a sub-wakala investment facility. Proceeds will be channelled into sharia-compliant ventures.

GIC's investments include companies such as The National Titanium Dioxide Co, Gulf Industrial Investment, Gulf Re Holdings Ltd, Al Dur Power & Water Co and National Industrialisation Co.

It was set up in 1983 by the Gulf Cooperation Council and is owned by the six member states of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and UAE.

GIC had previously issued $328.4m of bonds in Malaysia in 2008.

Issuers in Malaysia accounted for about 60 percent of total global Islamic bond sales of $14.3bn in 2010, according to estimates by Thomson Reuters.

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