The Asian Development Bank (ADB) has issued its debut Malaysian ringgit bonds in the domestic capital market of Malaysia. The issue has a principal amount of RM400mn and a bullet maturity of five years. The lead arrangers of the issue were AmMerchant Bank Berhad and Citibank Berhad.
ADB’s Putra ringgit bonds carry a semiannual coupon of 3.94% per year and are priced at 2 basis points below the five-year benchmark Malaysian Government Security. Before launching the issue, ADB and the lead arrangers conducted an extensive roadshow to present the deal to key institutional investors in Kuala Lumpur.
Offered through a bookbuilding process, the issue generated strong demand with total bids amounting to more than RM2.6bn or 6.5 times the issue amount. The issue will achieve a broad distribution with institutional investors such as insurance companies and pensions funds, as well as financial institutions.
ADB’s ringgit bond issue represents many firsts in the Malaysian capital market: first issue by a foreign entity; first supranational issue; and first issue rated triple-A by Fitch, Moody’s, and Standard & Poor’s.
“This pioneering transaction is a further accomplishment in ADB’s quest for developing regional bond markets,” ADB vice-president Khempeng Pholsena says. “In line with ADB’s assistance to the ASEAN+3 Bond Market Initiative, we are planning to continue to tap regional bond markets.”
The bond issue underscores ADB’s confidence in the Malaysian capital market. This, together with the new standards created through this issue in respect of a regulatory framework and documentation, will facilitate issuance by other foreign borrowers in Malaysia. In addition, the issue would help enhance liquidity in the cross-currency swap market, particularly as ADB plans to undertake currency swap transactions for asset and liability management purposes.
“ADB is particularly pleased to be able to raise funds in regional member countries for its operations,” ADB treasurer Mikio Kashiwagi adds. “The ringgit bond issue continues ADB’s long-standing tradition of market opening transactions in the region, including Japan; Republic of Korea; Taipei,China; and India. We hope to be able to further strengthen our presence in regional bond markets in the future.”
AmMerchant Bank executive director Kok Tuck Cheong says: “The initiative by the Government of Malaysia in allowing multilateral development banks to issue ringgit denominated bonds is a significant milestone and should be highly commended. The commitment and understanding of all parties, in particular, the Ministry of Finance, Bank Negara Malaysia, and the Securities Commission, have been instrumental in facilitating the issuance of the bonds by ADB in a short timeframe.”