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ISLAMIC FINANCE AND CAPITAL AND LIABILITY MANAGEMENT

Khazanah maintains sound capital and liability management while pushing for greater innovation in Islamic finance

Khazanah continues to innovate and deepen its pool of Islamic finance products while maintaining a strong balance sheet and sufficient financial safety nets. Innovation and adaptability are central to our capital and liability management strategy.

Since 2005, our fundraising activities have expanded and redefined the landscape of Islamic finance. We structured and issued the first exchangeable sukuk with TM and Axiata in 2006, the first Singapore dollar-denominated sukuk in 2010, and the world’s first Renminbi-denominated sukuk in 2011.

In August 2016, we offered our seventh underlying security via an USD398.8 million Exchangeable sukuk, exchangeable into Beijing Enterprise Water Group shares. The exchangeable sukuk format serves as a funding instrument as well as a means for us to gradually divest the underlying security in a uniform manner over the tenor of the sukuk.

We are prudent in managing our liability and actively match our borrowings with our assets. Khazanah’s capital market activities are strictly driven by investment requirements with the nation’s long-term economic interest in mind. We also have a disciplined approach to divestment enabling us to reinvest monetised value from our portfolio into new sectors and geographies.

Although Khazanah does not receive regular infusions of capital from the Government, we diligently assist the Government to reduce its contingent liabilities. In March 2016, we issued a USD750 million sukuk to refinance Penerbangan Malaysia Berhad’s USD1.0 billion guaranteed notes. In December 2016, we redeemed the first RM2.0 billion Khazanah Government Guaranteed sukuk out of our RM20.0 billion programme. We shall continue the redemption of the sukuk in years to come until the final redemption date in 2032.

Khazanah issued Malaysia’s first Sustainable and Responsible Investment (SRI) sukuk in June 2015. The SRI sukuk combines the concepts of sukuk financing with philanthropy. This is in line with our key philosophy that Islamic finance must be linked to real economic activities, which emphasises socioeconomic development through innovative and fair financial policies and products. Continuing this effort, Khazanah plans to issue the second tranche of SRI sukuk in 2017.

As the world’s biggest Islamic debt market, Malaysia accounts for 46.4% of the total value of global sukuk issuance as at end December 20161. Khazanah, as a key player, together with our investee companies such as Axiata and TNB continue to pave the development of Islamic capital markets by embracing Islamic finance as a preferred method to raise capital.

In a volatile market backdrop, Khazanah’s robust credit standing and strong reputation have been fundamental in preserving our capability to secure competitive funding allowing us to stay on track towards meeting our long-term goals.


1 Source: MIFC 2016 Global Sukuk Market Snapshot 27 March 2017

“Working in Khazanah often involves managing multiple stakeholders with diverse interests. I believe that, sharing our true values, understanding the true values of others and finding that common ground, are the foundation that allow us to build strong and successful relationships with our partners and stakeholders.”

Azri Zaharuddin
Director, Investments

Khazanah’s Sukuk Issuances

2016

US Dollar-Denominated Straight Sukuk

  • Size: USD750 million
  • First USD straight sukuk issuance by Khazanah
  • Third foreign currency issuance under its Multicurrency Islamic Securities Programme.
  • Attracted demand of 1.5x booksize

Beijing Enterprises Water Group Limited (BEWG) Exchangeable Sukuk

  • Size: USD398.8 million
  • First Sukuk to offer exposure into China’s growing water utility sector
  • Highest exchange premium achieved for an exchangeable sukuk by Khazanah
  • Achieved the highest exchange premium for a zero coupon and zero yield exchangeable Sukuk since 2007
  • Received 1 award to date

Most Innovative Islamic Finance
Deal of the Year 2016 in Southeast Asia

2015

Sustainable and Responsible Investment Sukuk (SRI)

  • Size: RM100 million
  • World’s first RM-denominated SRI sukuk
  • Received 9 awards to date

2014

Tenaga Exchangeable Sukuk

  • Size: USD500 million
  • First internationally distributed sukuk structured based on Mudarabah & Murabahah Principle
  • Received 3 awards

2013

IHH Healthcare Exchangeable Sukuk

  • Size: SGD600 million
  • First SGD-denominated exchangeable sukuk
  • First exchangeable sukuk in Asia offering exposure to the healthcare sector
  • Oversubscribed by 5.5 times
  • Achieved tightest end of pricing and premium guidance
  • Received 7 awards

2012

Parkson Exchangeable Sukuk

  • Size: USD357.8 million
  • Achieved tightest end of pricing and premium guidance
  • World’s first sukuk to be priced at negative yield
  • First Malaysian equity-inked deal since early 2010
  • Oversubscribed by 3.4 times
  • Received 3 awards

2011

Islamic Medium Term Notes Issues by Danga Capital Bhd

  • Size: CNY500 million
  • World’s First Offshore CNY sukuk
  • First CNY offering by an ASEAN quasi-sovereign issuer
  • Oversubscribed by 3.6 times
  • Upsized from CNY300 million to CNY500 million due to investor demand
  • Received 6 awards

2010

Islamic Medium Term Notes Issued by Danga Capital Bhd

  • Size: SGD1.5 billion
  • Largest sukuk issuance in Singapore
  • Largest SGD issuance by a foreign issuer in Singapore
  • First SGD sukuk issuance out of the Malaysian International Islamic Financial Centre initiative
  • Longest-tenured SGD sukuk
  • Largest sukuk to date by Khazanah
  • Received 8 awards

2009

Multicurrency Islamic Securities Issuance Programme by Danga Capital Berhad

  • Size: RM10 billion
  • Structure: Musyarakah (Profit Sharing Agreement) and Wakalah (Agency Agreement)

2008

Parkson Exchangable Sukuk

  • Combined offering of USD550 million exchangeable sukuk and USD97 million equity placement
  • 11 times book cover attracting more than 200 investors reflecting strong demand for quality Malaysian credit
  • The first sukuk that offers Islamic investors exposure to China’s retail consumption growth story, continuing the innovation in structured Islamic financial products
  • Received 11 awards

2007

PLUS Exchangeable Sukuk

  • Size: USD850 million
  • 13 times book cover and priced at the tightest end of the range
  • Tight pricing was achieved despite being priced amidst an environment of volatile interest rates
  • Largest equity-linked issue of Malaysia in 2007
  • Third largest equity-linked issue out of Asia-Pacific excluding Japan / Australia in 2007
  • Received 3 awards

2006

TM/Axiata Exchangeable Sukuk

  • Size: USD750 million
  • World’s first Shariah compliant exchangeable sukuk
  • Received 17 awards
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