Danainfra markets RM2.4b subway sukuk

Business Times, 9 July 2012

DanaInfra Nasional Bhd, a Malaysian state-owned company, started marketing RM2.4 billion (US$753 million) of Islamic bonds to yield 20 to 33 basis points over similar-maturity local government bonds, two people familiar with the matter said.

The Kuala Lumpur-based firm, formed to fund development projects, is offering the syariah-compliant securities in four portions with maturities of seven, 10, 12, and 15 years, said the people, who couldn’t be named as the information is private. Proceeds will be used to help finance construction of a subway in the country’s capital.

Stretching 156 kilometers (97 miles), the subway is Malaysia’s biggest infrastructure project. The first line is estimated to cost RM30 billion and is scheduled to be operational by July 2017, DanaInfra said in a statement July 3.

The offering is the first phase of an RM8 billion government-guaranteed bond program intended to cover building costs until June 2013, Fazlur Rahman Ebrahim, DanaInfra’s principal officer, said July 3. The planned sukuk, or debt that pays returns to comply with Islam’s ban on interest, has attracted interest from more than 150 investors ahead of pricing, including some from overseas, he said.

Fazlur couldn’t be immediately reached for comment on the pricing via telephone and e-mail today. State-owned Mass Rapid Transit Corp, which is overseeing subway development, has so far awarded RM15.5 billion of construction contracts, DanaInfra said. -- Bloomberg