Development Bank of Kazakhstan raises MYR240 mln with debut Islamic bonds
ALMATY. July 20 (Interfax) - The Development Bank of Kazakhstan (DBK) raised MYR240 million (about $80 million) with the placement of a debut issue of 5-year Sukuk, or Islamic bonds at an annual yield of 5.5%, bookrunner Halyk Finance reported.
Kazakh investors bought 38% of the bonds, totalling MYR89.4 million, and Malaysian investors bought 62%.
Bids for the bonds from Kazakh investors made through KASE total MYR173 million, with 82% coming from pension funds and 18% from clients of brokers.
DBK said in a statement that it is the first issuer of Sukuk in the former Soviet Union.
"DBK is the first issuer in the former Soviet Union to put together and successfully carry out a deal to issue Sukuk Islamic securities in accordance with the norms and principles of Shariah. This is a considerably achievement both for the bank and for Kazakhstan in general. This process was the result of considerably effort on the part of the government of Kazakhstan, DBK and the lead managers to promote our credit history in Malaysia and strengthen the reputation of Kazakhstan in the Islamic investment community. We are confident that this deal will open the way for other issuers in the region to diversify their funding on Islamic markets," DBK deputy CEO Zhaslan Madiyev was quoted as saying in the bank's press release.
The bonds with face value of MYR1,000 were issued according to Malaysian law and were offered on the offered to Kazakh investors on Kazakhstan's organized securities market simultaneously with their placement in Malaysia.
AmInvestmentBank, Kazakhstan's Halyk Finance and the Kuwait Finance House were the joint lead managers of the issue, and HSBC and RBS were the joint lead coordinators.
DBK's board of directors made the decision to issue and place medium-term Islamic bonds according to Malaysian laws on March 14, 2012. The bond program is expected to total up to $500 million. The first issue was expected to total $200 million-$300 million and have a duration of at least five years.
Rating agency Standard & Poor's assigned DBK's program to issue MYR1.5 billion worth of medium-term Islamic bonds a credit rating of BBB+, while Fitch assigned an expected rating of BBB-(exp).
Sukuk Murabaha are a type of Islamic security where the creditors are not interested in the interest income on the principle debt, but in the difference between the purchase price and the price of selling the borrower exchange traded goods.
Analysts said DBK's issue of Sukuk was one of the most anticipated events on Kazakhstan's financial market this year, particularly since the possibility of issue such securities has been discussed in the country for years. The discussions primarily revolved around the issue of sovereign Sukuk, although analysts pointed to market interest in both sovereign Sukuk and Islamic bonds from quasi-state institutions, particularly companies that are part of the Samruk Kazyna sovereign fund. Demand for such securities was thought to be very strong, with Kazakhstan's Fattah Finance, for example, putting demand at $1 billion to $3 billion.
DBK, founded in 2001, is primarily focused on development production infrastructure and the manufacturing industry, and facilitating foreign and domestic investment in the country's economy. The bank is part of Samruk Kazyna.
