Malaysia issues first non-physical assets sukuk

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The government of Malaysia has achieved an innovative breakthrough with the recent issuance of US$1.5 billion in trust certificates. The sukuk offering was structured under Islamic shariah principles and the underlying assets comprise 100% non-physical assets, namely vouchers representing entitlement to a specified number of travel units and shariah -compliant shares.

“This is an innovative transaction, not least because it’s the first sovereign sukuk to initially involve only non-physical underlying assets,” said Kevin Wong, a partner at Linklaters in Singapore, who co-led the team involved in the transaction. It’s also the first sukuk to include entitlements to travel on public transportation as an underlying asset.

Under the structure, at least 80% of the proceeds will be invested in vouchers representing an entitlement to certain travel units, while the balance will be invested in shares of Pengurusan Aset Air. These assets may be replaced by leasable assets at any time during the life of the sukuk.

The deal was oversubscribed by 4.2 times, attracting an aggregate interest of more than US$6.3 billion from a combined investor base of almost 200 accounts. This offering marks the government’s fifth US dollar-denominated global sukuk issuance.

Legal counsel: Linklaters advised the Ministry of Finance and Malaysia Sukuk Global on the issuance. Kevin Wong and Hyung Ahn led the team, which included Phill Hall and Xavier Amadei.