Maybank prices first subordinated lower tier-2 sukuk

Maybank diversifies its investor base with a benchmark deal that prices at the tight end of guidance.
Malayan Banking (Maybank), through MNN Sukuk Inc., priced the first ever Reg-S lower tier-2 10-year non-call-five sukuk last night at 33bp over six-month Libor, the tight end of a revised guidance set at 33bp-35bp. AseamBankers, HSBC and UBS led the bank through the tightest deal for a Malaysian sub-borrower, and the second tightest sub-debt deal from Asia ex-Japan.

The deal follows the first global sukuk issued by the Federation of Malaysia in June 2002 and the first exchangeable sukuk by Khazanah Nasional Bhd in September 2006.

About 70 accounts participated in the $300 million BBB+/Baa1-rated trade, which attracted a book of $2.4 billion. 64% of the bonds sold to Asia, 13% to the Middle East, and 23% to Europe. 28% of the bonds were allocated to banks, 28% to asset managers, 9% to insurance companies and 3% to private banks. The deal closed with a coupon of 33bps over six-month dollar Libor, with a step-up to 133bp if not called by 2012.

In terms of comparables, bankers quoted Public Bank, Woori, NACF and Hana BankÆs outstanding issues as the most relevant. At announcement of guidance, Public BankÆs similarly-rated 2017 non-call 2012 (5%) was trading at 37bp over Libor, while Woori and NACFÆs 2016 non-call 2011 (6.125%) traded at 39bp. More, Hana BankÆs 2017 non-call 2012 (5.375%) was trading at 39bp over Libor, with NACFÆs latest 10-year non-call-five offering being marketed at 42bp.

The roadshow encompassed Hong Kong, Singapore, the Middle East (Abu Dhabi and Bahrain) and London. This involved intensive investor education for these first-time sukuk buyers, however, Maybank's investment-grade rating allowed more time to be spent on selling the structure of the deal, rather than the credit.

Sources say that Maybank successfully established relationships with a number of new accounts, and achieved some investor diversification with a respectable allocation to the Middle East. Indeed, the banks were expressly asked to favour Middle Eastern accounts in allocation. Islamic participation will likely increase on the secondary market when Middle Eastern investors receive their credit approvals.

However, commentators have noted that the issue could have priced higher due to its rarity and quality, and that a few basis points may have been left on the table. Sources close to the deal, however, argue that the exercise served to develop the Islamic market by issuing a large and liquid benchmark, and build investor relationships. Higher pricing in the area of 28bp or 27bp, as some have suggested, would have been incompatible with these objectives.

Maybank seems to have managed, then, to penetrate a new investor base while still maintaining balanced distribution between liquidity and buy-and-hold investors.
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