Largest exchangeable or convertible issue out of Asia ex-Japan this …

Largest exchangeable or convertible issue out of Asia ex-Japan this year
Singapore – The Singapore office of international law firm Clifford Chance has advised Khazanah Nasional Berhad (“Khazanah”) as obligor, and the special purpose issuer Rafflesia Capital Limited on the groundbreaking issue of US$750 million of Shariah-compliant exchangeable trust certificates (sukuk).

Khazanah is the investment holding arm of the Government of Malaysia, and this transaction represents a number of firsts: the world’s first exchangeable Islamic bond; the largest ever exchangeable or convertible issue out of Malaysia; and the largest exchangeable or convertible issue out of Asia ex-Japan this year.
Crawford Brickley, head of Clifford Chance’s Asian capital markets group, commented: “The innovative structure represented by the certificates was more than 18 months in the making.

These certificates are an important step forward in the development of Shariah-compliant financial instruments. Clifford Chance has been at the forefront of Islamic finance in London and the Middle East, and we are delighted to have assisted Khazanah in this landmark transaction for Asia.”
The offering comprises US$750 million of periodic payment trust certificates due 2011, which are exchangeable into ordinary shares of Telekom Malaysia Berhad, currently held by Khazanah. Telekom Malaysia is a leading telecommunications operator in Malaysia.

Provisions have been made to remove any income which is not Shariah-compliant from the dividend payments made by Telekom Malaysia on the shares underlying the certificates. The certificates also provide for repurchase in the event that Telekom Malaysia ceases to satisfy certain Shariah requirements. Financial protection is also offered in the event that Telekom Malaysia stops paying dividends and there are no funds available for the annual periodic payments. These measures include allowing a sizeable cushion between the annual periodic payments and Telekom Malaysia’s current dividend yield, as well as a sinking fund for excess payments.

The certificates are listed on the Labuan International Financial Exchange Inc. and The Stock Exchange of Hong Kong.
The Clifford Chance team was led by partner Crawford Brickley in Singapore, together with partners Debashis Dey and Connie Heng in Dubai and Hong Kong, respectively.
UBS acted as the global coordinator for the offering and was also joint bookrunner and lead manager, together with CIMB and HSBC Amanah.

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