Malaysia aims to raise as much as 30 billion ringgit ($9.9 billion) through an Islamic bond program to fund construction of a mass railway in the Southeast Asian nation’s capital, the project’s manager said.
Dana Infra Sdn., a finance ministry company set up to fund infrastructure projects, will sell ringgit-denominated Islamic bonds, or sukuk, with maturities of as much as 65 years, Azhar Abdul Hamid, chief executive officer of Mass Rapid Transit Corp., said in an interview today. It will initially take a bridging loan of 500 million ringgit from a consortium of banks to cover early building work, he said.
“Getting funding is not a problem as we have government support,” Azhar said. Dana Infra “will sell 20 billion to 30 billion ringgit of sukuk in three to four months.”
The planned sale follows a record issuance of 30.6 billion ringgit of Shariah-compliant bonds by Malaysia’s PLUS Bhd. completed in January. Rising global investor appetite for sukuk, that comply with the religion’s ban on interest, prompted Development Bank of Kazakhstan, Islamic Bank of Thailand and Turkey to announce plans to offer securities in 2012 over the past three weeks.
Dana Infra’s bonds will likely receive a AAA rating from local rating companies due to sovereign backing, Azhar said. Irwan Siregar, deputy secretary to the treasury, wasn’t immediately available to comment by telephone today.
State-owned MRT Corp. is managing the 156-kilometer (97-mile) Kuala Lumpur railway that may cost 48 billion ringgit including rolling stock, according to a government estimate in 2010. An updated costing will likely be made at year-end once key contracts have been awarded, Azhar told reporters last week when granting the project’s first major construction contracts worth a total 1.74 billion ringgit to IJM Corp. and Ahmad Zaki Resources Bhd.
The railway will ease traffic congestion in the capital and carry 2 million passengers a day when finished, with the first line scheduled for completion in 2016, the government said in its 2010 report.