According to traders, the bonds were trading at around 3.85% yesterday, with last nightÆs absolute yield standing at 3.90%. Traders say that sentiment in the Malaysian bond market is currently very weak, and that the market is suffering from an overhang after the government auctioned M$3 billion worth of 20-year bonds last Wednesday.
A HSBC report on Malaysia's electronics sector states that the country's exports were down 11.3% year-on-year in April and down 9.6% in the last three months. Electronics make up over 50% of Malaysia's total exports.
Nevertheless, Silterra built an order book of M$9 billion for its sukuk last week, closing approximately five times oversubscribed and pricing at the tight end of the 3.90%-4.05% guidance. The bookbuild lasted just 1.5 days, with offshore demand accounting for 31% of the final order book. In terms of investor-type, bookrunners allocated 17% of the bonds to insurance companies, 9% to funds and 74% to financial institutions.
The issuer also entered into a cross-currency swap transaction as an asset and liability management exercise, synthetically converting the Malaysian currency debt into US dollars to match the companyÆs revenue. The swap transaction of M$1.8 billion represents the largest onshore dollar/ringitt cross-currency swap ever transacted.
The bonds pay the lowest coupon for a government-guaranteed offering and the transaction is the largest domestic Ijara Sukuk to date. Ijara is a lease-based instrument and is one of the most widely used among various types of Islamic issues in Malaysia. Others include Musyarakah, Bai Bithamin Ajil, Murabaha, Istisna and Mudarabah.
Silterra is a leading semiconductor wafer foundry that provides wafer fabrication services to semiconductor companies globally. SilterraÆs headquarters and factory are located in Kulim in Malaysia, but the company also has offices in San Jose (California), Scottsdale (Arizona) and Hsinchu (Taiwan). Silterra Malaysia is a subsidiary of the Malaysian Ministry of Finance investment arm Khazanah Nasional Berhad.
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