AirAsia Joins Growing Band of Companies Selling Perpetual Sukuk

Malaysian budget carrier AirAsia Bhd. plans to sell perpetual sukuk as it joins a growing number of issuers selling Islamic debt with no set maturity.

The company has approval from the securities commission to set up a 1 billion ringgit ($304 million) sukuk program, according to a stock exchange filing today. The bonds will be callable after the fifth, seventh, or 10th year, a factor that will be determined prior to issuance. The debt isn’t rated.

Perpetuals are becoming more popular as they allow issuers to raise funds without damaging creditworthiness because they are treated as equity rather than debt on the balance sheet. Malaysia Airports Holdings Bhd. is also planning to sell similar notes, following in the footsteps of companies such as Malaysian Airline System Bhd., which kicked off the nation’s issuance of such Shariah-compliant securities in June 2012.

The offering, if it’s completed this year, will help add momentum to Islamic bond sales that have increased 65 percent to 50.3 billion ringgit in 2014, surpassing 2013’s total, data compiled by Bloomberg show. Sovereign wealth fund 1Malaysia Development Bhd. is planning to sell 8.4 billion ringgit of regular sukuk, which would be the nation’s biggest issue of 2014 so far.

AirAsia, the region’s biggest budget carrier, flies to 121 destinations from 16 hubs including Malaysia, Thailand, Indonesia and the Philippines, according to its website.

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