Apr 30 2012
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Expanding the Malaysian Sukuk Market
Mr. Edwards and Mr. Nethercott discussed Malaysia's current standing as the global sukuk leader and outlined key considerations for potential expansion. Such considerations include internationalizing its investor base (with a focus on the US, Europe and Asia) and providing for multi-currency issuances, an evolution from the current ringgit-based market.
"US capital markets remain the deepest capital markets and investors in these markets are increasingly interested in chasing yield, including Shari'ah debt yield, from quality issuers," commented Bryant Edwards, chair of Latham's Middle East Practice. Craig Nethercott, co-chair the firm's global Islamic Finance Practice Group, noted that "investors out of the US increasingly are familiar with Shari'ah compliant structures and we are seeing the beginnings of Shari'ah compliant issuers laying the groundwork for a 144A issuance in the US markets." (For more on this rule, please refer to The Book of Jargon, Latham's online glossary of corporate and bank finance terminology.)
Saudi Electricity Company had just such an issuance in recent weeks, with its successful US$1.75 billion Reg S Sukuk (including a US$500 5 year tranche and US$1,250 10 Year Tranche). As Reuters reported, "Demand for the bond was seen being very strong, given the rarity value of a dollar sukuk from a majority government-owned Saudi corporate...The company's big investment needs over a long-term period allowed it to add a rare 10-year portion to its sukuk, which would appeal to global investors."
© Press Release 2012
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