Launch Partners

Friday, March 29, 2024

Launch Partners

Case study: Alam Flora’s debut SRI Sukuk

Alam Flora, an environmental management company providing waste collection and public cleansing services, issued a one-year RM1 million (US$217,037) SRI Islamic medium-term note on the 10th April 2023. Concurrently, it also issued a RM1 million one-month Islamic commercial paper, which matured on the 10th May.

With a RM700 million (US$151.92 million) Sukuk program, the facility is a notably small issuance. Alam Flora’s Sukuk rating of ‘MARC-1IS/AAIS’ by MARC Ratings is primarily driven by the strength of its 22-year concession agreement with the Malaysian government which provides revenue visibility until 2023.

While Alam Flora has not responded to ISFI’s request for comment, MARC Ratings noted that Alam Flora plans to issue Sukuk between 2022 and 2025, with the facilities structured to be fully repaid within the remaining concession period.

“The Sukuk will be issued on a staggered basis, with the group’s net debt-to-equity ratio projected to peak at 0.65 times in 2025 before gradually reducing from 2026 onwards,” the rating agency noted.

According to the issuer’s Green Financing Framework, proceeds from SRI Sukuk issuances will be channeled toward achieving SDGs 9, 11, 12, 13 and 15 under the categories of renewable energy (waste-to-energy), sustainable waste management, sustainable water management and projects, climate change adaption and environmentally sustainable management of living natural resources and land use.

Also in the SRI Sukuk space, Alam Flora’s parent company, Bursa Malaysia Main Market-listed independent power producer Malakoff Corporation, entered into an agreement with Rising Promenade, RP Hydro (Kelantan) and Rising O&M Engineering to develop three small hydropower plants with a combined installed capacity of 84 megawatts.

Signed on the 21st March this year, the projects will be funded largely through the issuance of an ASEAN green SRI Sukuk Wakalah facility. On the 21st February, RAM Ratings assigned a preliminary rating of ‘AA3’ to the yet-to-be issued Sukuk, considering an issuance size of RM960 million (US$208.35 million).

Alam Flora’s inaugural SRI Sukuk

RM1 million (US$217,037)


10th April 2023
Summary of terms and conditions
Issuer
Alam Flora
Size of issue
RM1 million (US$217,037)
Purpose
To finance/refinance eligible green projects.
Tenor
One year
Profit rate
4.6%
Payment
Semi-annually
Currency
Malaysian ringgit
Maturity date
9th April 2024
Lead arranger(s)
Maybank Investment Bank
Governing law
Malaysian law
Islamic structure
Murabahah, Tawarruq
Underlying asset
Shariah compliant assets
Rating
‘MARC-1IS/AAIS’ by MARC Ratings

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