The Malaysian sovereign sustainability US$1.3 billion Sukuk issuance is the world’s first US dollar-denominated sustainability Sukuk issued by a government. Oversubscribed by 6.4 times, the issuance saw significant demand and positive ratings. It sets a new benchmark for sustainability Sukuk and signals a wider adoption of sustainability initiatives in Islamic finance.
The offering marks the Malaysian government’s foray into the sustainability Sukuk space. The program received ‘A3’ and ‘A-’ ratings from Moody’s Investors Service and S&P Global Ratings respectively. The landmark issuance demonstrates the government’s effort to combat climate change and working toward a resilient and inclusive economy, in line with its Shared Prosperity Vision 2030.
Initially a US$1 billion issuance, the government decided to upsize to US$1.3 billion due to the high demand. The Sukuk facility was issued in two tranches: US$800 million 10-year trust certificates and US$500 million 30-year trust certificates. The demand contributed to the lowest yield yet for a US dollar Malaysian Sukuk issuance with the certificates priced at 2.07% and 3.075% respectively.
The Sukuk attracted diverse investors through its virtual roadshow covering Asia, the US and the Middle East. The 10-year tranche had a geographical investor breakdown of 55% of the principal amount from Asia; 33% from Europe, the Middle East and Africa (EMEA); and 12% from the US. About half (46%) of the 30-year Sukuk principal amount was distributed to investors in Asia; 33% to EMEA; and 21% to the US.
Chart 1: 10-year tranche investor geography
Chart 2: 30-year tranche investor geography
Fund managers and insurance companies had the largest share of investment, representing 67% of the 10-year tranche and 83% of the 30-year tranche. Central banks and governments had an 18% share of the 10-year tranche and 4% of the 30-year tranche. About 14% of the 10-year tranche and 10% of the 30-year tranche were attributed to banks. The remaining 1% of the 10-year tranche and 3% of the 30-year tranche were attributed to other investors.
Chart 3: 10-year tranche investor type
Chart 4: 30-year tranche investor type
Sustainalytics assessed the Sukuk framework and affirmed that it is in line with all four components of the Social Bond Principles 2020. The underlying assets are vouchers representing travel entitlement on Malaysia’s Light Rail Transit, Mass Rapid Transit and KL Monorail networks, all of which are classified as sustainable assets.
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DEAL NAME: Malaysian sovereign US dollar sustainability Sukuk 
ISSUANCE DATE: 22/4/21 |
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Summary of terms and conditions |
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Issuer |
Malaysia Wakala Sukuk |
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Obligor |
Malaysian government |
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Size of issue |
Tranche 1:US$800 million Tranche 2:US$500 million |
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Purpose |
Social and green projects aligned to the UN Sustainable Development Goals (SDGs) agenda |
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Tenor |
Tranche 1: 10 years Tranche 2: 30 years |
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Profit rate |
Tranche 1: 2.07% (T+50bps) Tranche 2: 3.08% (T+80bps) |
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Payment |
Annual |
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Currency |
US dollar |
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Maturity date |
Tranche 1: April 2031 Tranche 2: April 2041 |
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Lead manager(s) |
CIMB, HSBC, JPMorgan |
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Bookrunner(s) |
CIMB, HSBC, JPMorgan |
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SDG structuring agent(s) |
HSBC Amanah Malaysia, JPMorgan |
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Listing |
Hong Kong Stock Exchange |
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Underlying assets |
Sustainable asset vouchers representing travel entitlement on Malaysia’s Light Rail Transit, Mass Rapid Transit and KL Monorail networks |
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Rating |
‘A3’ (Moody’s Investors Services), ‘A-‘ (S&P Global Ratings) |
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Shariah advisor(s) |
CIMB Islamic Bank and HSBC Global Shariah Supervisory Committee |
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Structure |
Wakalah |
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Tradability |
Yes |
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Listing |
Hong Kong Stock Exchange |
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Investor geographical breakdown |
Tranche 1: 55% Asia; 33% Europe, Middle East and Africa; 12% US Tranche 2: 46% Asia; 33% Europe, Middle East and Africa; 21% US |