Malaysia plans US$9.9b sukuk for rail job

(Bloomberg) – Malaysia plans to raise as much as RM30 billion (US$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 Bhd, a finance ministry company created to fund infrastructure development, will sell ringgit-denominated Islamic notes, 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 late yesterday.

It will initially take a bridging loan of RM500 million from a consortium of banks to cover early building work, he said.

The sale of the bonds will help satisfy demand among insurers and banks for longer-maturity debt after companies in Malaysia issued a record RM75.6 billion of sukuk last year, with 88 per cent due in less than 10 years, according to data compiled by Bloomberg.

Other local firms may also need to raise funds as part of a government-backed US$444 billion plan to build railways, roads and power plants over the next decade.

“The Dana Infra program will allow investors, especially insurers, to extend their asset duration,” Michael Chang, who oversees US$1 billion as head of fixed income at MCIS Zurich Insurance Bhd. in Kuala Lumpur, said in an interview today.

“Demand for such bonds will be healthy because long-dated Islamic paper are rare.”