AmInvestment eyes more Islamic municipal bonds

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KUALA LUMPUR: AmInvestment Bank Bhd is in talks with several municipal councils on the issuance of Islamic municipal bonds, said its director of Islamic Markets, Mohd Effendi Abdullah.

He said several municipal councils in various states were considering proposals to issue Islamic municipal bonds.

Effendi said not all municipal councils were willing to share their business ventures and profits as the municipal bonds were based on the mudharabah or partnership concept.

“Not many states would want to share their business and (we also have to be) careful in joint ventures,” Effendi told reporters here yesterday after inking a memorandum of understanding (MoU) with the Melaka City Municipal Council (MCMC) for the proposed issuance of up to RM100 million municipal sukuk mudharabah.

AmInvestment Bank is the principal adviser and lead arranger for MCMC’s Islamic securities programme.

Effendi said the details of the bond issuance, tenure and returns were expected to be finalised by June following more discussions with the council.

“The drawdown period is up to the state itself because the structure (of the instrument) has not been fixed. It depends on the type of projects planned, their tenure and completion,” he said.

Effendi said AmInvestment’s first municipal bond deal was with the Pasir Gudang Municipal Council in Johor in 2005, where the issuance amounted to RM80 million, maturing in 2011.

Speaking at the signing ceremony, Melaka Chief Minister Datuk Seri Mohd Ali Rustam said MCMC would use RM78 million of the funds raised to purchase the Melaka central bus terminal from the state government.

He said it would also be used for commercial shoplot development projects and to speed up implementation and upgrading of flood mitigation systems in the state.

MCMC recorded RM145.3 million in revenue last year  compared with RM130.3 million in 2007 and had total assets, including land and buildings, worth RM259 million, said Mohd Ali.  This article appeared in The Edge Financial Daily, March 20, 2009.