In Malaysia, Time Engineering recently completed an M$566.6 million ($149 million) Islamic securitization via Commerce International Merchant Bankers. The deal is the first issued from an M$2.5 billion ABS facility, established last month.
Time, which provides IT products and services, is 45.63% owned by government conglomerate, United Engineers. Government involvement does not stop there, either, as reports from Malaysia suggest that around 60% of the paper was placed with the state-run Employment Provident Fund, the country's biggest pension fund.
In addition, the transaction is collateralized by government payments on a contract whereby Time supplies computers and training to state schools. The first payment is due April 2006, with yearly installments continuing until 2010.
The deal - issued out of the Musyarakah One Capital SPV - features five tranches with maturities between one year and five years. Malaysian Rating Corp. rated the entire transaction at the triple-A level. The one- through four-year tranches are each sized at M$115 million, in addition to the M$106.56 million of five-year bonds.
The expected returns ranges from 2.90% for the one-year piece to 4.25% for five years, while the average coupon is 4%.
Under Islamic law, the Musyarakah concept is effectively a joint venture between two parties to finance the project, in this case the issuer and investors. Profits will be distributed at a pre-agreed ratio, with any losses shared according to the amount invested.
This differs to most of the other Islamic ABS deals that have been completed in Malaysia, which tend to use the Mudharabah concept, in which the investors provide the capital funding while the issuer manages the assets. Again, profits are distributed at a pre-agreed rate but any losses are borne solely by the investors.
Staying in Malaysia, Karambunai Corp., a company specializing in developing tourist resorts in the State of Sabah, said last week it plans to issue an M$1 billion CMBS.
Karambunai has hired Affin Merchant Bank to arrange the deal, which will see the firm transfer ownership rights to its Nexus Resort Karambunai development and other land assets into a special purpose vehicle. Karambunai will use the proceeds to repay existing debt and for working capital needs.
Although the transaction is still subject to regulatory approval, Karambunai plans to issue M$200 million of senior notes and an M$840 million junior tranche, both with legal maturities of seven years.
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