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Saturday, April 20, 2024

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MRCB still finalizing revisions to existing program to allow for sustainable Sukuk

Work on revising Malaysian Resources Corporation (MRCB)’s existing Sukuk Murabahah program to accommodate potential sustainable Sukuk is still underway, ISFI has learned.

MRCB, which is primarily involved in urban infrastructure construction and property development, is currently in the process of revising the terms and conditions of its existing RM5 billion (US$1.12 billion) Sukuk Murabahah program to allow it the flexibility to issue sustainable Sukuk, as well as to complement the existing (non-sustainable) Sukuk Murabahah issuances.

“We are still in the process of finalizing this revision of terms,” Haridas Sivadas, the head of group corporate communications at MRCB, told ISFI.

The decision to revise an existing program instead of setting up a new one is primarily driven by cost.

“It is cheaper by far for the issuer to revise an existing Sukuk program than to establish a new Sukuk program for issuances of sustainable Sukuk, and both routes achieve the same objective, ie to allow the issuer to issue sustainable Sukuk of the existing Sukuk program to cater for issuances of sustainable Sukuk going forward,” explained Adrian Chee, apartner at Adnan Sundra & Low, the solicitor for MRCB’s Sukuk Murabahah program.

The avoidance of the recurring annual costs for a new program including facility agent fees and Sukuk trustee fees also contribute to the financial benefits of revising an existing program rather than establishing a new program.

According to Adrian, it is relatively simple to update the terms and conditions of the existing Sukuk program to cater for issuances of sustainable Sukuk going forward for excluded offers catered to sophisticated investors.

It is also easier for issuers with Sukuk programs which already have had previous issuances as the introduction of sustainable Sukuk features for programs without prior issuances would require a new lodgment for the program with the Securities Commission Malaysia (SC).

MRCB’s Sukuk program currently has an available limit of RM3.35 billion (US$751.57 million), with RM1.65 billion (US$370.17 million) in outstanding Sukuk. In 2023, the company has issued three Sukuk facilities worth RM450 million (US$100.96 million) so far.

Once the revised terms and conditions have been finalized, the issuer must notify the SC of the revised terms of the program within 14 business days after they come into effect.

According to Adrian, the revision exercise would typically be comprised of broadening the scope of the section on the utilization of proceeds for the issuance of sustainable Sukuk.

The revision pack to be submitted to the SC would also typically include the relevant sustainable Sukuk checklists in accordance with the SC’s requirements. A fresh information memorandum or an addendum to the existing information memorandum must be deposited with the SC within seven days after it is first issued.

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