Cagamas may issue another sukuk worth up to RM2b

NATIONAL mortgage company Cagamas Bhd will issue another landmark sukuk, with size estimated to be between RM500 million and RM2 billion.

Chief executive officer Steven Choy said the size of the Islamic debt paper will depend on the home loans that banks sell to Cagamas.



"If they sell us big loans, it will be bigger, if small loans, it will be small," Choy told reporters on the sidelines of the Global Islamic Finance Forum in Kuala Lumpur yesterday.

On the significance of the latest debt paper, Choy said: "We haven't worked out yet on the assets that are coming in, so it is not the right time to talk about it."

It is understood that the sukuk will be launched by the year-end.

Sources told Business Times that the latest Cagamas sukuk will be based on Ar Rahnu concept, or pledging.

"It is termed as covered sukuk (an Islamic version of covered bond)," one of the sources said.

Covered sukuk is an Islamic version of covered bonds, which are debt securities backed by cash flows from mortgages or public sector loans. They are similar in many ways to asset-backed securities created in securitisation, but covered bond assets remain on the issuer's consolidated balance sheet.

Business Times had earlier reported that the new Cagamas sukuk will not incorporate "doubtful" principles, just like its previous benchmark Sukuk Al-Amanah Li Al-Istithmar (Sukuk ALIm), launched in mid-July.

While Sukuk ALIm was designed to meet the requirements of broader investors especially from the Middle East, Cagamas' new sukuk is expected to attract local institutional investors.

Last year, the country's biggest buyer of home loans sold RM11.3 billion worth of bonds, down by more than half from the record RM25 billion in 1999. About 40 per cent, or RM4.3 billion, were sukuk.

Cagamas issues bonds or debt securities to finance the purchase of housing loans from banks, freeing up lenders to give out more loans.

It is the second biggest issuer of debt papers after the government and carries the highest credit rating of "AAA" from local rating agencies. This means that its paper is highly sought after by investors because the probability of a default is very low.

By Business Times