KUALA LUMPUR, (Reuters) – Kuwait-based Gulf Investment Corporation (GIC) has launched a 500 million ringgit ($164 million) sukuk issue in Malaysia as part of an existing funding programme, one of a growing number of Middle East issuers to seek alternative sources of funding.
GIC, which was set up to drive private enterprise and economic growth in the Gulf region, had earlier established a 3.5 billion ringgit sukuk programme in the Southeast Asian country.
GIC launched the five-year, 500 million ringgit portion on Wednesday, a source with direct knowledge of the deal said.
GIC was not immediately available for comment.
RBS is the deal’s sole principal adviser and arranger. RBS and Maybank Investment Bank are the joint lead managers.
The fund-raising programme was rated AAA, the highest rating, by Malaysia’s RAM Ratings.
The Islamic bonds are structured according to the wakala bi istithmar concept where GIC will be appointed as agent to collect and manage the sukuk proceeds for the bondholders.
GIC then appoints itself to manage the sukuk assets and will invest the net proceeds through a commodity murabaha financing arrangement and a sub-wakala investment facility. Proceeds will be channelled into sharia-compliant ventures.
GIC’s investments include companies such as The National Titanium Dioxide Co, Gulf Industrial Investment, Gulf Re Holdings Ltd, Al Dur Power & Water Co and National Industrialisation Co .
It was established in 1983 by the Gulf Cooperation Council and is owned by the six member states of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates.
GIC had previously issued 1 billion ringgit of bonds in Malaysia in 2008.
Apart from GIC, Dubai is working on plans to issue about $1.5 billion in sovereign sukuk in Malaysia while National Bank of Abu Dhabi, the UAE’s largest lender by market value, recently launched 500 million ringgit in 10-year sukuk.
Issuers seeking sharia-compliant funding can tap into an estimated $79 billion in excess liquidity in Malaysia, which is also home to the world’s largest Islamic bond market.
Issuers in Malaysia accounted for about 60 percent of total global Islamic bond sales of $14.3 billion in 2010, according to estimates by Thomson Reuters.