Saturday December 15, 2012
UEM sells RM600mil of five-year sukuk at 4.25%
KUALA LUMPUR: UEM Land Bhd, Malaysia’s biggest property company, cut costs on its first Islamic bond after investors bid for six times the amount on offer, seeking to diversify holdings amid a shortage of real estate sukuk.
The company, ranked the fourth-highest investment grade of AA- by Malaysian Rating Corp, sold RM600mil of five-year notes at 4.25%, the low-end of its price guidance, according to an e-mailed statement yesterday that clarified orders were close to RM3.7bil. Encorp Bhd, which builds housing for teachers and is rated one step above UEM Land, sold syariah-compliant debt due in 2017 at 4.32% in May.
Encorp was one of only five property firms to have sold sukuk in Malaysia this year prior to the latest offering, accounting for less than 5% of 2012’s record RM93.4bil issuance. Islamic borrowing costs at an all-time low are spurring sales by companies participating in the government’s US$444bil development programme. UEM, which is 65% owned by Khazanah Nasional Bhd, the sovereign wealth fund, is constructing an industrial complex in the southern region of Johor across the strait from Singapore under the plan.
“The backing from Khazanah helped build investor interest,” Fariza Taib, the fixed-income manager overseeing RM1bil at Kuala Lumpur-based Asian Islamic Investment Management Bhd, said in an interview on Thursday. “Demand is good because it’s a liquid maturity and a good credit.”
UEM Land’s offering is the first from a RM2bil syariah-compliant bond programme. The proceeds would be used for “general corporate purposes,” according to a e-mailed statement on Thursday. UEM Group Bhd, the parent company, sold RM30.7bil of sukuk in January, the world’s single-biggest Islamic offering. – Bloomberg