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October 26, 2009 19:37 PM

Players, Regulators Must Unite To Protect Bond Market, Says Nazir

PUTRAJAYA, Oct 26 (Bernama) -- Market players and regulators must work together to preserve and protect the bond market, CIMB Group chief executive Datuk Seri Nazir Razak said Monday.

According to him, there are concerns regarding the standards of transparency and governance surrounding some of the recent issuances in the bond market.

"Every investor must be given opportunity to invest and drive pricing to the right level," Nazir said.

"Other countries in the region envy what we have. There is nowhere that we can have issuances of such size as that of RM20 billion by Pengurusan Aset Air Bhd (PAAB) in a quick time," he said.

He was speaking at a press conference here after the signing ceremony on the PAAB Islamic medium term notes programme and Islamic commercial papers of up to RM20 billion, collectively called the sukuk programme.

CIMB Investment Bank Bhd is the lead arranger, lead manager and bookrunner of the sukuk programme.

Nazir said there was a possibility that the CIMB bond programme could see more issuances next year compared to the number this year.

The programme amounted to RM48 billion last year while this year it is expected to be higher at around RM50 billion, including the PAAB issuance, he said.

For the PAAB issuance, the first tranche totalling RM2.5 billion was priced at 2.70 per cent for one-year tenure, 4.40 per cent for five-year tenure and 5.05 per cent for 10-year tenure.

Offered through a book-building exercise, the initial offer to investors was RM2 billion and this was subsequently upsized to RM2.5 billion due to the strong demand.

The book order reached as high as RM4.15 billion, with orders coming from a diversified base of investors.

RAM Rating Services Bhd has accorded the highest long-term rating of AAA and highest short-term rating of P1 for the Islamic medium term notes programme and Islamic commercial papers programme respectively.

PAAB chairman Datuk Seri Tajol Rosli Ghazali said today's agreement marked PAAB's maiden fund-raising exercise in the debt capital market and the largest water-related bond programme ever established in Malaysia.

"PAAB will be utilising the proceeds to fund the development of water infrastructure and its working capital requirements," he said.

To date, PAAB has acquired water assets from Melaka, Negeri Sembilan and Johor and started negotiations with other state governments and their respective state water operators.

PAAB chief executive officer Ahmad Faizal Abdul Rahman told reporters after the signing ceremony that it hoped to reach salient agreements with the remaining 11 states by end of this year.

"We are hoping to close negotiations with Perlis, Kelantan, Perak and Pahang," he said.

Tajol Rosli said to fulfil its role as a national water assets provider, PAAB had started the development of water infrastructure development projects in Selangor, Melaka and Johor.

Second Finance Minister Datuk Seri Ahmad Husni Mohamad Hanadzlah said during the signing ceremony that PAAB would be responsible for developing the nation's water infrastructure and funding for capital expenditure.

"This will allow the state water operators to concentrate solely on providing water services to consumer and focus on improving their operational efficiency. This will utlimately lead to improvement in the quality of water supply and efficiency in the water services industry," he said.

Ahmad Husni said there was a licensing framework under the Water Services Industry Act which required operators of water assets to apply to the National Water Services Commission (SPAN) for a service licence.

To qualify for this licence, operators will have to meet key performance indicators and strict requirements set by SPAN, failing which their licence will be revoked, he said.

-- BERNAMA

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