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Cagamas issues Malaysia’s first SRI sukuk for affordable housing
Offering priced at competitive rate, attracts strong demand
22 Oct 2020 | Chito Santiago
Datuk Chung Chee Leong
Datuk Chung Chee Leong

Malaysia’s national mortgage corporation Cagamas has announced the combined issuance of its inaugural Asean sustainability SRI (socially responsible investing) sukuk and Islamic medium-term notes (IMTNs) totalling 450 million ringgit (US$108.40 million).

Issued under its existing 60 billion ringgit IMTN programme, the offering comprises of a three-year 100 million ringgit SRI sukuk and 350 million ringgit IMTNs. The proceeds from the SRI sukuk will be used to fund the purchase of eligible Islamic financing for affordable housing, while the proceeds from the IMTNs will be used to fund Islamic house financing.

Cagamas president and CEO Datuk Chung Chee Leong says the inaugural Asean sustainability SRI sukuk, issued under the Islamic principle of murabaha, was executed at a competitive rate. The issuance, conducted via a public book building exercise led solely by RHB Investment Bank, attracted a strong investors’ response with the order book close to 2 billion ringgit at the initial price guidance.

This enabled the company to progressively improve the price guidance, leveraging on the demand momentum to close at a final price of 2.23% per annum for the SRI sukuk and 2.25% per annum for the IMTNs with a combined final book-to-cover (BTC) ratio of 3.5 times.

The final prices for the issuance represent 39bp to 41bp above the corresponding three-year Malaysian government investment issue. “Cagamas is encouraged by the exceptionally strong level of support from investors as evidenced by the lower yield recorded on the SRI sukuk compared to the IMTNs,” says Chung. “We had participation from a diversified pool of investors, including a statutory body, sovereign wealth funds, pension funds, financial institutions, asset managers, and insurance companies.”

The SRI sukuk for affordable housing was assigned the highest social benefit rating of tier-1 by RAM Sustainability under Cagamas’ sustainability bond/sukuk framework. The framework comprises of two social solutions, namely affordable housing and employment generation via SME, and five green solutions which include renewable energy, energy efficiency, green buildings, low-carbon transportation, sustainable water and wastewater management.

“The positive conclusion of this issuance is a strong testament of Cagamas’ commitment to support the development of industry-led sustainable product offerings, such as affordable housing loans and financings,” adds Chung. “It is, indeed, a meaningful milestone for Cagamas amid the current challenging market conditions.”

The transaction represented the company’s seventeenth issuance exercise for 2020 and brings the year-to-date issuance amount to 6.68 billion ringgit.