GIC sells $255m sukuk

Kuwait-based Gulf Investment Corp (GIC) has raised $255 million by selling five-year Islamic bonds to a pool of Malaysian ringgit investors at 4.90 per cent, a source with direct knowledge of the deal said.

The sukuk, which is part of a 3.5 billion ringgit funding programme set up earlier, will be issued on Wednesday to about a dozen investors, said the source who declined to be identified as the deal has not been announced.

The Islamic bond sale, arranged by Malaysia's AmBank , shows how more Gulf issuers are seeking to tap the ringgit-denominated market.

Under the deal, 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 invest them. Proceeds will be channelled into sharia-compliant ventures.

"(The sukuk) offers an additional avenue to diversify our sources of funding as part of the management's efforts to enhance its liquidity risk management structure," said Martin Joy, treasurer of GIC in an e-mailed statement.

"We foresee more foreign issuers from the GCC region which may follow suit in tapping into non-traditional sources to obtain long term funds."

From an investor perspective, demand is high for Gulf paper among Malaysian institutions, who have an appetite for sukuk and are looking to gain international exposure in local currency, said Chavan Bhogaita, head of markets strategy unit at National Bank of Abu Dhabi.

And issuers are eager to tap the substantial liquidity and diversify their sources of financing, he added.

An Abu Dhabi government department and Bahrain's Gulf International Bank are also planning ringgit-denominated sukuk issues, sources told Reuters last month.

National Bank of Abu Dhabi (NBAD), the UAE's largest lender by market value, launched a 10-year 500 million ringgit Islamic bond in December, its second ringgit bond during the year.

GIC, which is owned by the GCC's six member states, had sold 600 million ringgit of five-year Islamic bonds in Malaysia at a yield of 5.25 percent in February.

GIC had previously issued 1 billion ringgit of bonds in Malaysia in 2008.

"There is an increase in interest and there are definitely more potential issuers considering the option of issuing in ringgit for Malaysian placement," said Rizwan Kanji, debt capital markets partner at King & Spalding in Dubai.

"Whether all of these will come to fruition is uncertain, but for now it has at least become an alternative to consider."

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