Malaysia: Axiata US$500m Sukuk gets strong response

KUALA LUMPUR: Axiata Group Bhd’s 10-year US$500mil Sukuk received strong response with a final book of over US$900mil orders, it said.

The telco company said on Wednesday this was a bid-to-cover ratio of over 1.8 times, and a final yield of 4.357%.

“The bookbuilding exercise commenced with an initial price guidance of US Treasuries (“UST”) + 2.60% area. Demand for the Sukuk issuance led to a final price guidance of UST + 2.45% area ± 0.05% at Asian close/London mid with books in excess of US$1.4bil,” it said.

Axiata said the issuance attracted interest from a diverse group of Islamic as well as conventional investors, comprising asset management companies, financial institutions, insurance companies, and sovereign wealth funds, with participation from 64 accounts.

It said the Sukuk would be issued by its Malaysian-incorporated special purpose vehicle, Axiata SPV2 Bhd. 

The Sukuk Issuance is the third issuance under Axiata’s multi-currency Sukuk issuance programme with an aggregate nominal value of US$1.5bil (or its equivalent in other currencies), established on July 17, 2012. 

Proceeds of the Sukuk Issuance will be utilised to fund the proposed acquisition of Ncell Pvt. Ltd. 

The Sukuk issuance has been assigned ratings of Baa2 and BBB by Moody’s Investors Service Inc. and Standard & Poor’s Ratings Services, respectively.

The Sukuk issuance, which will be listed on Bursa Malaysia (under the Exempt Regime) and the Singapore Exchange Securities Trading Ltd, is structured based on the Shari'a principle of Wakala.

The underlying assets are 100% airtime vouchers, representing an entitlement to a specified number of airtime minutes on the mobile telecommunications network of subsidiaries of Axiata for on-net calls.

Axiata’s president  and group CEO Datuk Seri Jamaludin Ibrahim said, “The strong participation from international investors for this Sukuk issuance is validation of our solid fundamentals and we are pleased that investors are supportive of our aspirations as a regional telecommunications champion”. 

He added this Sukuk Issuance, the third drawdown off Axiata’s US$1.5bil multi-currency Sukuk issuance programme, continued to demonstrate Axiata’s ability to access the debt capital markets as it saw strong cross-border participation from a wide and diverse base of investors, with 71% from Asia, 11% from Europe and 18% from Middle East. 

“Charting a new benchmark, we have taken this opportunity to build Axiata’s curve with a 10-year issuance maturing in 2026, in line with our long-term strategy and growth plans. Axiata will continue to look towards opportunities in the capital markets to strengthen our capital base. 

“Through Ncell, Axiata will be entering the fast-growing brownfield market of Nepal with a controlling stake of its number one telecom operator. As a rare and opportunistic asset, 

“Ncell would be immediately accretive to Axiata’s financials when consolidated. At the same time, Axiata’s regional footprint will expand to a total of 10 countries in Asia, strengthening its position to further unlock shareholder returns and sustain long-term growth.” 

CIMB Bank (L) Limited, Deutsche Bank AG, Singapore Branch and HSBC Amanah Malaysia Bhd were the joint arrangers of the Sukuk programme.

CIMB, Deutsche Bank, The Hongkong and Shanghai Banking Corporation Ltd and HSBC Amanah were the joint lead managers and bookrunners for the Sukuk issuance.

(The Star Online / 16 March 2016)

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Malaysia: Axiata plans airtime sukuk

KUALA LUMPUR: Malaysia's Axiata Group Bhd joins a growing number of companies using mobile-phone airtime to back Islamic transactions as Asian subscribers are forecast to dominate the global market in three years.

The nation's biggest telecommunications operator, with businesses in India, Indonesia and Sri Lanka, set up its first multi-currency sukuk programme worth US$1.5bil backed by telephone minutes, according to a July 19 stock exchange filing.

Emirates Telecommunications Corp, the sheikdom's largest phone company, established a US$1bil syariah-compliant debt plan supported by similar assets in November 2010.

Cellphone owners in Asia will account for about 65% of seven billion worldwide by 2015, according to a February report from Tokyo-based research company ROA Holdings Inc.

More Islamic bond issuers are using airtime as an asset class due to the limited pool of commodities such as land and property, Mohamad Akram Laldin, who sits on the Malaysian central bank's syariah advisory council, said in a July 30 interview.

“Airtime isn't physically tangible but its value, amount and quantity can be calculated and fixed, therefore it can be used as a syariah-compliant asset,” Abas A Jalil, chief executive officer of Amanah Capital Group Ltd, a consultancy company in Kuala Lumpur, said in a July 30 interview. “This is what we call innovation in Islamic finance, whereby more commercially viable products will be introduced in the future.”

Phone minutes are also used to underpin Islamic loans in Malaysia.IDOTTV Sdn Bhd, which helps arrange funding backed by airtime, expects sales of airtime vouchers to expand to RM150mil (US$48mil) per day by the end of the year from RM45mil now, based on talks with banks,chief operating officer El Hadj Azahari Pawan Teh said in an interview in Kuala Lumpur on Wednesday.

Syariah-compliant loans to individuals grew 27% to RM28.2bil in 2011 and reached RM29.2bil

this year as of June, according to central bank data.

IDOTTV uses mobile-phone minutes to back the loans in the same way crude palm oil facilitates trades based on the Islamic principle of Tawarruq, IDOTTV's Azahari said.

In Tawarruq personal financing, a client buys an item on credit from a bank on a deferred-payment basis and then sells it for cash to a third party. “Demand for airtime is expected to rise further as Islamic banks look to expand their deposits and credit card business using Tawarruq,” he said.

Record sukuk sales

Axiata, based in Kuala Lumpur, plans to issue Islamic bonds denominated in euros, U.S. dollars and the Singapore currency, giving the group wider access to a pool of investors including those in Asia, the Middle East and Europe, the company said in its stock exchange filing.

The sukuk program is rated BBB- by Standard & Poor's, the lowest investment grade, it said.

Sales of sukuk, which pay returns on assets to comply withIslam's ban on interest, are off to a record this year as average yields at an all-time low encourage companies to tap the market. Issuance climbed 65% to US$28.6bil, compared with the same period of 2011, according to data compiled by Bloomberg.

Average yields on sukuk fell 11 basis points, or 0.11 percentage point, this week to a record low of 3.17% and have declined 82 basis points this year, according to the HSBC/Nasdaq Dubai US Dollar Sukuk Index.

The difference between the average and the London interbank offered rate, or Libor, narrowed 17 basis points to 219 basis points and is down from 273 basis points at the end of last year. Malaysia's OSK-UOB Islamic Fund Management Bhd isn't interested in purchasing Axiata's Islamic bonds because the company considers securities backed by phone minutes as being less safe than debt underpinned by land and property, which can be sold off in the event of a default.

“Sukuk using airtime vouchers involves a lot more risks than asset-backed debt,” Chan Cheh Shin, who manages RM850mil as the head of Syariah-compliant bonds at Kuala Lumpur-based OSK-UOB, said in an interview on Wednesday. “I'm not keen on such sukuk.”

Islamic notes returned 6.3 % in 2012, according to the HSBC index, while debt in developing markets climbed 12.1%, JPMorgan Chase & Co's EMBI Global Composite Index shows.

The Bloomberg Malaysian Sukuk Ex-MYR Index, which tracks non-ringgit denominated sukuk listed in Malaysia rose 0.06 % to 109.08 this week. It gained 4.5% this year.

India, China, Indonesia, the Philippines and Vietnam will lead growth in mobile-phone users, according to ROA's report entitled Asian Mobile Market Forecast 2012-2015.

The number of subscribers in Malaysia will increase 8.8 % this year from about 40 million in 2011, the Kuala Lumpur office of US-based research company Frost & Sullivan predicted in a July 31 e-mailed statement. Other mobile-network operators may also consider phone airtime as an underlying asset for future Islamic bond offerings, especially if a property that could be used to back sukuk is already tied to a mortgage, according to Kuala Lumpur-based law firm Lee Hishammuddin Allen & Gledhill.

“It may especially appeal to telecommunications companies that face legal issues in using real estate or tangible assets for their sukuk,” Megat Hizaini Hassan, a partner and head of the Syariah-compliant finance practice at the company, said in an e-mail yesterday. “Legally it would be possible to use airtime as the asset for the underlying asset-transaction documents required for the Syariah structure.

(The Star Online / 03 August 2012)

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Axiata Plans to Raise $1.5 Billion via Sukuk

Axiata Group Bhd. (6888.KU) Thursday said it plans to raise up to $1.5 billion by issuing multi-currency Islamic bonds to secure cheap long-term funds and improve capital efficiency.

Malaysia's largest mobile telephone company by sales said in a statement to the stock exchange that it would be the first Asian telecommunications company to issue multiple currency Islamic bonds, or sukuk.

It didn't specify which currencies, nor did it specify maturities or the number or size of tranches.

It called the issuance "strategic" as it would appeal to regional investors while also introducing the company to a diverse pool of investors across the Middle East and Europe, increasing its prospects for future fundraising.

Islamic financing differs from conventional financing in that it adheres to Shariah, or Islamic law, which prohibits the charging of interest and discourages speculation or benefiting at the expense of others.

Sukuks were first sold in 1990 by a Malaysian unit of Royal Dutch Shell PLC (RDSA.LN). They comply with Shariah by replacing coupons with payouts derived from tangible assets, such as leases or joint ventures.

Axiata plans to count air time vouchers--minutes on its mobile network--among its assets underlying the sukuk.

"Whilst Axiata has no immediate funding requirements, having the programme in place will enable the Group to remain nimble and able to move quickly in the event of any changes and demands of the marketplace," Group Chief Financial Officer James Maclaurin said in the statement.

The sale will also support government efforts to position the Southeast Asian nation at the centre of global Islamic finance, President and Chief Executive Jamaludin Ibrahim said.

Malaysia accounted for 68.7% of the $84.4 billion worth of sukuk issued worldwide in 2011. Global sukuk issuance totaled $43.5 billion in January-March, 55% more than in the same period last year, and with Malaysia accounting for 71%.

Malaysia's primary need for capital comes from large infrastructure projects, such as an urban rail transport project, under the government's Economic Transformation Program. This initiative began in 2010 with the goal of turning the economy into a developed economy by 2020.

CIMB Bank Ltd., HSBC Amanah Malaysia Bhd. and Merrill Lynch (Singapore) Pte. Ltd. will be the joint lead arrangers for Axiata's planned sukuk sale.

(Fox Business / 19 July 2012)

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com