11 July 2007
Tom Young

Khazanah’s successful second exchangeable sukuk could open up Dubai’s International Finance Exchange (DIFX) for future Islamic bonds, following the $850 million listing.

The company, which is the investment holding arm of the Malaysian government, issued the world’s first Islamic exchange bond last year. This sukuk, the company’s second Islamic bond, was listed on the DIFX as well as the Hong Kong Stock Exchange and Malaysia’s Labuan Finance Exchange.

The addition of the DIFX alongside the more traditional Hong Kong and Malaysian exchanges was a market first. DIFX’s enthusiasm for new listing companies meant there were few problems, and the inclusion of the two-year old exchange appears to be a welcome one.

“While it [the DIFX’s inclusion] was window dressing to the extent that it was in addition to the Hong Kong and Labuan listings, it certainly appealed to Middle Eastern and European investors, who will be helped by the closer time zones,” said Crawford Brickley, Clifford Chance’s head of Asian capital markets and lead partner on the deal.

The same firms involved in last year’s IFLR award-winning Khazanah sukuk were present here. Clifford Chance acted for Khazanah, with Linklaters advising the underwriters. On local aspects, Kadir Andri & Partners acted for Khazanah and Adnan Sundra & Low represented the underwriters.

The issuance proved popular, drawing demand worth more than $7.8 billion, making it the largest ever exchangeable out of Malaysia. “Being the first of its kind, last year’s Khazanah sukuk was a far more difficult sell,” said Brickley. Investor take up was lower than was hoped, he said.

“But now, it’s not simply that shariah compliance has been proved. In addition, the financial success of the last issuance has shown to Islamic investors it’s a worthy product.”

Although similar in structure to the original, this sukuk was mandated and launched in little over a month, compared to 18 months on the first issue.


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