KUALA LUMPUR (Feb 24): Khazanah Nasional Bhd has issued a five-year US$750 million (approximately RM3.15 billion) straight sukuk to refinance Penerbangan Malaysia Bhd's (PMB) US$1 billion guaranteed notes maturing this year.

In a statement today, the sovereign wealth fund said that the USD-denominated straight sukuk was priced at a profit rate of 3.04%, which attracted a demand of 1.5 times book size from financial institutions, asset management companies, statutory bodies and insurance companies.

Khazanah added that it was able to refinance PMB's notes — which are guaranteed by the Malaysian government — at a savings of 2.59% per annum against the current 5.63% coupon, by capitalising on low US Treasury yields.

"Despite challenging market conditions, Khazanah achieved its target issue size at a spread of 178 basis points above prevailing five-year US Treasuries," the fund said.

The sukuk will be issued via the fund's special purpose vehicle Danga Capital Bay, which will be the latter's third foreign currency issuance under its multicurrency Islamic Securities Programme. This is Khazanah's first USD straight sukuk issuance.

The USD sukuk, structured under the Wakalah principle, will be listed on Bursa Malaysia Securities Bhd (under an exempt regime), Labuan International Financial Exchange Inc and the Singapore Exchange Securities Trading Ltd.

CIMB and DBS Bank Ltd are the joint global coordinators for this sukuk offering. Joint bookrunner, meanwhile, include CIMB, DBS Bank and Standard Chartered Bank, while CIMB Islamic acted as the sole shariah adviser for the transaction.

Khazanah chief financial officer Datuk Mohd Izani Ghani said that the sukuk issuance reflects Khazanah's ability to access the debt capital markets and achieve a competitive spread against a backdrop of market volatility.