Malaysia debt markets report: conventional markets

BOX: The issuer’s view

Lim Ghee Kheong is the group treasurer of Usaha Tegas, the parent company of Binariang, which was the issuer of the RM15.35 billion sukuk for Maxis Communications in December 2007 that remains the largest ever sukuk. While the liquidity for that issue must seem a long time ago, Lim sees opportunity for some issuers. “I think there is still liquidity for issuers to tap, but it will depend on the rating and the issuer as well,” he says. “I think the investors have become very selective in recent months about the type of credit they want to take. And obviously leverage is an issue.”

For the right issuer, he thinks there is demand for “a couple of hundred million US for corporate type issuers,” but says that “if you want to go beyond that, you will basically need to rely on the likes of the EPF to be your anchor investor.”

Binariang’s deal was protected by banks underwriting the whole transaction, and by EPF’s presence, but “from what we have seen in recent months it’s still pretty much the same players in the market,” Lim says. “Except that you do not have the foreign players in the market anymore. They used to be in the market buying, nibbling quite a bit in 2007 and early 2008, but they stopped after that.”

Binariang demonstrated the advantage of broadening the investor base by making an issue Islamically compliant. “Look at Malaysian banks,” he says. “Islamic banks are obviously required to place funds in Islamic paper. But also conventional banks have a requirement to place some funds in Islamic instruments. So there is a natural demand pool bidding for that paper. I was talking to a banker this morning who was telling me that for loans now you can get about 20 basis points lower for Islamic loans compared to a conventional term loan.”

 This article was one of a series in IFR Asia’s Malaysia debt markets report, April 2009