Khazanah raises S$1.5 billion in Singapore

Khazanah issues a dual tranche deal, pricing the largest ever sukuk in the Singapore market.

Khazanah Nasional Berhad issued a dual tranche deal on Tuesday, pricing a S$600 million ($443 million) five-year sukuk and a S$900 million ($665 million) 10-year sukuk. The bonds were issued by Danga Capital Berhad, which is a special purpose vehicle set up by the borrower.

Proceeds of the issue will go towards the funding of Shar'iah-compliant operations as well as the payment of Parkway Holdings, which has been acquired by its subsidiary Integrated Healthcare Holdings.

Last week, Khazanah announced that it would be buying all the remaining shares that it does not own in Parkway for a price of $3.95 per share. The offer was revised up in order to fend off a competing bid by Fortis, and if Khazanah is successful in its plan to buy all outstanding shares, the offer could amount to as much as S$3.5 billion ($2.6 billion).

The five-year security was sold at par with a 2.615% annual coupon, which was a spread of 90bp over the Singapore swap offer rate (SOR). The maturity date is August 11, 2015.

The 10-year sukuk pays a 3.725% coupon, equivalent to a spread of SOR plus 120bp. The maturity date is August 11, 2020.

The deal attracted demand of 4.3 times the issue size enabling Khazanah to upsize the transaction from S$1 billion to S$1.5 billion. Arrangers -- CIMB, DBS and OCBC -- took orders from 78 accounts from Singapore, Malaysia, Hong Kong, Brunei and Europe.

Banks were sold 67% of the 2015 bonds, asset managers bought 18%, private banks 5%, sovereign wealth funds 6%, insurance houses 3% and corporate investors 1%.

For the 10-year sukuk, banks received 38% of the issue, insurance houses got 27%, asset managers 20%, private banks 10% and sovereign wealth funds 5%.

The benefit of pricing in Singapore as opposed to the ringgit or dollar markets was that the issuer could enjoy tighter spreads than earlier Petronas and Malaysia sovereign sukuk deals, which had been executed in G3 currencies.

The book opened on Tuesday with a price guidance of 90bp to 100bp above SOR for the five-year bond, and 120bp to 130bp above SOR for the 10-year sukuk. The deal was closed within a four-hour window to limit market and execution risk.

Upon receiving investor feedback, revised price guidance of 90bp above SOR (five-year) and 120bp above SOR (10-year) was released at noon Tuesday for the two tranches and the combined size was raised to S$1.5 billion. As books closed, demand peaked to S$4.3billion.

This deal priced after a one-day roadshow in Singapore on Monday and an accelerated bookbuilding process on Tuesday. At the end of Asia’s session yesterday, the bonds were trading at 88bp over SOR for the five-year and 118bp over for the 10-year.

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