TMW Lion, a subsidiary of German concern TMW Asia Property Fund, plans to become the first European issuer to tap Malaysia's domestic securitization market. TMW will issue M$190 million ($50.6 million) of Sukuk Ijarah lease-backed notes through the Focal Quality SPV, with OCBC Bank on board as arranger.
TMW, managed by Prudential Real Estate, invests solely in Asian real estate on behalf of German institutional investors. The fund is taking advantage of the relaxation of foreign exchange controls in April this year by Bank Negara. Previously, there were strict rules on foreign companies taking Ringgit outside Malaysia, an attempt by the central bank to prevent the kind of currency speculation that hit economies such as Thailand's during the Asian financial crisis.
Although it is the first German issuer of Islamic ABS in Malaysia, it is not the first German entity to go down the Islamic route. Last August, the Federal Government of Saxony successfully issued a $100 million Sukuk Ijarah. The deal, put together by Citigroup Global Markets, is backed by income generated by buildings owned by the Ministry of Finance.
TMW's deal will partly finance the M$340 million acquisition of three shopping malls - Lion Klang Parade, Lion Seremban Parade and Lion Parade. The Focal Quality SPV will lease back the properties to the sellers, with payments providing the primary source of cashflows in the deal. Occupancy rates at all three sites are around 90%, according to Rating Agency Malaysia, and projected cashflows are 1.7 times the lease payment obligations.
The transaction comprises M$110 million of triple-A rated paper, M$30 million of AA2' rated notes, a M$40 million A2' rated piece and M$10 million of A3' paper. All have expected maturities of five-years.
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