Malaysia: Danainfra issues RM8b sukuk for MRT’s SBK Blue Line
KUALA LUMPUR (July 4, 2012): The government is issuing an RM8 billion sukuk financing programme to partly finance the Mass Rapid Transit (MRT) project which is developed and managed by Mass Rapid Transit Corp Sdn Bhd (MRT Corp).
The sukuk will be issued via Danainfra Nasional Bhd, a wholly-owned subsidiary of Minister of Finance Inc. Danainfra is a special funding vehicle for the government to source for funds to finance its infrastructure projects, with the MRT project being the first.
Yesterday, Danainfra signed the agreement for the Islamic commercial papers and medium term notes programme with four banks.
Minister of Finance II Datuk Seri Ahmad Husni Hanadzlah, who witnessed the signing, said: "It is expected that around RM30 billion worth of funds will have to be sourced to finance the completion of the Sungai Buloh-Kajang line, also known as the SBK Blue Line, which is the first line to be constructed under the MRT project.
"It is hoped that with more good quality sukuk being issued to the market, this may create further depth and drive further activity and liquidity through higher volumes being traded on a day-to-day basis."
The RM8 billion is the first tranche of financing for the MRT project's SBK Blue Line. The entire MRT project is scheduled to be operational by July 2017 and to date, 33 out of 85 work packages have been awarded to the value of RM15.5 billion.
The maiden issuance will be the Islamic medium term notes of up to RM2.4 billion which is targeted for July 20, with book-building expected to be held on July 9 or 10.
To date, Danainfra has provided total financing of up to RM1 billion for the MRT project.
Danainfra principal officer Fazlur Rahman Ebrahim said of the RM2.4 billion, RM1 billion will be for bridging loans and the rest to finance the project.
He said the subsequent issuance is expected in October, to the value of RM5.6 billion and the total RM8 billion will be fully exhausted by June 30 next year.
All the tender packages are expected to be awarded by year-end and the actual cost of the entire project will be determined in the first quarter of 2013.
Husni said a way to increase investor base is by tapping the retail market and introducing longer-dated bonds.
"The retail bonds will allow members of the public to invest in bonds or sukuk in lower denominations of RM1,000 and above. The longer-dated bonds will have tenors beyond the normal tenor of 10, 12 and 15 years currently available in the market.
"We would like to see bonds or sukuk with tenor of maturity of 25 years and above. The introduction of retail bonds or sukuk and longer-dated bonds will further spur the Malaysian capital markets and the country's economy as a whole.