- Board to offer Islamic bonds with maturities of up to 30 years
- Deal adds to record state-guaranteed sukuk sales in Malaysia
Malaysia’s Public Sector Home Financing Board plans to seek at least 2 billion ringgit ($490 million) from its debut sale of government-guaranteed Islamic bonds, according to people with knowledge of the matter.
Home Financing Board, formed in January to manage the provision of housing loans to civil servants, will sell Shariah-compliant securities with maturities of three to 30 years, said the people, who asked not to be identified as the information is private. The sale is the first offering from its 25 billion-ringgit Islamic bond program.
The Malaysian government transferred about 22 billion ringgit of debt to the board’s balance sheet this year, a move it said will reduce the nation’s ratio of debt to gross domestic product by about two percentage points. Government borrowings of 630.5 billion ringgit at the end of last year were 54.5 percent of GDP, close to the self-imposed 55 percent ceiling.
The Home Financing Board, whose bonds aren’t counted toward the national borrowing level, is tapping the market directly for funds in a role previously played by the finance ministry. The government plans to reduce its debt ratio to 45 percent by 2020, the finance ministry said in an e-mailed response to Bloomberg queries in June.
“The effect of the offering will cut the government’s debt, but it’s just an accounting treatment,” James Lau, a Kuala Lumpur-based investment director at Pheim Asset Management Sdn., said by phone Tuesday. “The board needs to manage its finances properly so that the guarantee doesn’t crystallize.”
Any deal will add to the record offerings of government-guaranteed sukuk in the world’s biggest Islamic debt market, according to data compiled by Bloomberg. Malaysian sales of state-guaranteed sukuk totaled 18.3 billion ringgit this year, or about 40 percent of overall Islamic bond sales in the country, the data show.
The board aims to sell about 7 billion ringgit to 10 billion ringgit of debt this year, Chief Financial Officer Mohd Zawawi Mohd Muhiddin told reporters in Kuala Lumpur in June. Calls to the general line at Home Financing Board’s office went unanswered Tuesday.