The Q&A was conducted with Haluan Gigih:
1. Why did you use this particular Islamic structure? What other structures were considered?
The Islamic structure used for the transaction is Musharakah as the principal activities of Haluan Gigih (HGSB), are Shariah compliant. It is also palatable as most of the targeted investors are locally-based who do not subscribe to the international standards for Musharakah structure. The other structure considered was the Mudarabah structure, as the issuer is a special purpose vehicle (SPV).
2. What were the challenges faced and how were they resolved?
The initial challenge was to determine the issuer of the Sukuk. For the parent company, Alloy Consolidated (ACSB), to establish an SPV to facilitate the Sukuk issue would be more prudent for risk management purposes. A major part of the Sukuk proceeds will be utilized to finance the acquisition and reimburse any deposit paid by HGSB in relation to its acquisition of the MTD and Shell buildings. Considering the ACSB as the issuer, it would also require itself to enter into another Islamic contract with HGSB for on-lending transaction. Therefore, it is more sensible for HGSB to directly issue the Sukuk.
The second challenge was to determine the relevant Islamic structure for the Sukuk. The nature of the SPV’s principal activities would only generate minimal income as compared to its financial obligation. As an SPV, it would also have a small amount of fixed assets. After taking into account the limitations, the initial thought for the relevant Islamic structure was Mudarabah. However, having no stricter covenants imposed on the Sukuk, the structure could possibly expose Sukuk holders to greater risks as any losses to the Mudarabah arrangement will be solely borne by them. Hence, the Musharakah structure was chosen after considering the commercial requirements.
3. Geographically speaking, where did the investors come from?
The program may not be offered, sold, delivered or disposed of, directly or indirectly, nor may any documents or other material in connection therewith be distributed in Malaysia or anywhere else, other than to persons who are within the categories set out in Section 4(6) of the Companies Act, 1965 (as amended from time to time). |