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World's First Shariah Exchangeable Trust Certificates Launched On LFX

by Mary Swire, Tax-News.com, Hong Kong

29 September 2006


Khazanah Nasional Berhad, the investment holding arm of the Government of Malaysia, has successfully launched and priced the world’s first issue of Shariah-compliant exchangeable trust certificates.

The offering, launched through a special purpose company, Rafflesia Capital Limited, comprises US$750 million 5-year Certificates due 2011, and is exchangeable into ordinary shares of RM1.00 each of Telekom Malaysia Berhad (TM) currently held by Khazanah. The offer was launched with an initial size of US$500 million but was increased due to strong demand.

The Certificates will be listed on Labuan International Financial Exchange and the Stock Exchange of Hong Kong.

The offering creates an exchangeable Sukuk benchmark for Islamic investors with an innovative structure that is widely accepted by international investors.

The offering was six times oversubscribed and strong demand was generated from investors in the Middle East and elsewhere, which included financial institutions, asset managers, insurance companies, pension funds, corporates and high net worth individuals. Proceeds raised from the offering will be used for additional working capital and for general corporate purposes relating to Khazanah’s principal business activities.

“Khazanah is pleased to execute this landmark issue which successfully addresses several important objectives simultaneously," commented Khazanah Managing Director, Dato’ Azman Mokhtar.

He went on to explain that:

"First, it is a cost effective way to raise funding. Second, in line with our long-term commitment to divest progressively stakes in our core holdings to increase market liquidity in an orderly fashion. Third, at US$750m we have set a new benchmark as the largest exchangeable instrument to be issued out of Asia ex Japan in the year to date and the largest ever out of Malaysia, surpassing Khazanah’s own US$414.5m exchangeable bond in December 2004. Fourth, the transaction has made significant inroads in tapping the Middle Eastern and Shariah-compliant investor base."

"Most significantly, as the world’s first Islamic exchangeable sukuk with many innovative features, this is a significant development of Islamic Finance in general and underscores Malaysia’s leading position as a global Islamic Financial Centre.”

UBS Investment Bank acted as the Global Coordinator while CIMB Investment Bank, HSBC Amanah and UBS Investment Bank are the Joint Bookrunners and Lead Managers for this issue.


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