Wednesday 30th July 2014
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TICKER - WEDNESDAY - JULY 30th: Avanti Mining Inc has entered into a debt financing mandate letter with a syndicate of six lenders to provide secured debt finance facilities worth $612m to develop the Kitsault molybdenum mine. Lenders include BNP Paribas, Caterpillar Financial Services Corporation, Export Development Canada, Korea Development Bank, Mizuho Bank and UniCredit Bank. The facility set out in the term sheet is comprised of $500m senior debt for a term of 10.5 years, $42m in equipment finance for a term of 5 years and $70m in the form of standby cost over-run facilities for a term of 8 years. The interest rate is LIBOR based, loan repayments are semi-annual or quarterly (for equipment finance) and there are mandatory prepayment provisions of a portion of excess free cash flow. The facility will include customary provisions for a financing of this type, including fees, representations and warranties, covenants, events of default and security customary for this type of financing - Jupiter Fund Management reports strong investment performance with assets under management rising to £33.1bn, with the asset manager benefitting from net mutual fund inflows of £875m over the first half of this year. The firm says it has maintained operating margins above 50%. Maarten Slendebroek, chief executive, says “We are pleased with the progress being made on the implementation of our growth strategy during the first half of 2014. The Board’s intention to increase cash returns to shareholders through a combination of ordinary and special dividends reflects this progress and confidence in our future growth potential. We believe this approach will allow shareholders to participate in our organic growth story while receiving an attractive yield.” There will be an analyst presentation to discuss the results on July 30th at 9.00am at FTI Consulting, 200 Aldersgate, Aldersgate Street, London, EC1A 4HD and is also accessible via a live audiocast for those unable to attend in person - CME Clearing says it will remove the Exchange-For-Swap (EFS) identifier for all NYMEX, COMEX and DME exchange futures executed in accordance with CME Rule 538 (Exchange for Related Positions). CME products were removed from EFS eligibility in October of 2010, and CBT products were removed from EFS eligibility in July of 2012. With this final transition, EFS will no longer be a supported transaction type at CME. The EFS transaction type has been harmonized into, and falls under, the Exchange for Risk (EFR) transaction referenced in Rule 538. EFR transactions are privately negotiated transactions (PNT) and include the simultaneous exchange of an Exchange futures position for a corresponding OTC swap or other OTC instrument. In addition, NYMEX, COMEX and DME exchange products will continue to be eligible for Exchange for Physical (EFP) and Exchange of Options for Options (EOO) privately negotiated transactions. Currently, an EFS transaction is represented as a TrdTyp=”12” on TrdCaptRpt messages. Effective on the above date, the TrdTyp value for these transactions should be submitted as “11” (EFR). CME Clearing will reject any NYMEX, COMEX, or DME exchange privately negotiated futures message sent as an EFS. The trade will subsequently need to be resubmitted with a valid transaction type to CME Clearing. Additionally, CME Clearing will re-categorize the Exchange of Options for Options (EOO) transaction type for all CME, CBOT, NYMEX, COMEX, and DME products. Currently, an EOO is represented as an option on an exchange for swap (EFS) in clearing and on FIXML TrdCaptRpt messages. Going forward, an EOO transaction will be represented as an option on an Exchange for Risk (EFR) - Chi-X® Japan Limited, a wholly owned subsidiary of alternative market operator Chi-X® Global Holdings LLC, says local brokers Yamawa Securities Co., Ltd. and Ark Securities Co Ltd., have commenced trading on Chi-X Japan, bringing the total number of trading participants to 23. Yamawa Securities and Ark Securities will access its market centre through Intertrade’s platform - The upgrade of the cities of Bogota and Medellin by Moody’s follows the upgrade on Colombia's sovereign ratings and reflects the close economic and operational links that these cities have with the central government. The rating action also reflects Bogota and Medellin's relatively solid financial metrics and moderate debt levels. The ratings assigned to both Bogota and Medellin are supported by their strong economic position in Colombia that includes a high level of own-source revenues and diversified local economies. The positive prospects of economic growth in the country translate in supportive conditions for both cities through higher local economic growth and own-source revenue growth. The assigned ratings also consider the close oversight that Colombia's central government exerts over the country's regional and local governments. Bogota and Medellin show solid governance and management practices that have supported historical low to moderate debt levels and moderate cash financing requirements, says the ratings agency. Between 2011 and 2013, Bogota's cash financing requirements averaged -5.7% of total revenues and net direct and indirect debt averaged 18.4% of total revenues. Medellin's cash financing requirements over the same period averaged -5.8% of total revenues and debt levels averaged 17.6% of total revenues.

Malaysia offers tax breaks to secure dominance of sukuk issues

Wednesday, 23 May 2012
Malaysia offers tax breaks to secure dominance of sukuk issues Malaysia is offering tax breaks to issuers in an effort to secure its global dominance of Islamic finance. It seems to be working, there appears to be a record rally in foreign-currency sukuk. Moreover, arrangers say interest is increasing among local corporate issuers; with Standard Chartered claiming a growing issuance pipeline worth $1bn, most of which will be in foreign currency denominated bonds. http://www.ftseglobalmarkets.com/

Malaysia is offering tax breaks to issuers in an effort to secure its global dominance of Islamic finance. It seems to be working, there appears to be a record rally in foreign-currency sukuk. Moreover, arrangers say interest is increasing among local corporate issuers; with Standard Chartered claiming a growing issuance pipeline worth $1bn, most of which will be in foreign currency denominated bonds.

Malaysia is seeking to strengthen its lead over the Gulf Cooperation Council countries as a centre of Islamic finance. It hopes to become a capital markets issuance hub, and in an effort to secure its place in the pantheon of issuing markets has announced that it is exempting investors from capital gains taxes on non-ringgit sukuk between now and the end of 2014. It is a smart move, given that more Asian companies see sukuk denominated in currencies other than the ringgit as an effective funding strategy. Malaysia has become the world’s leading sukuk market, accounting for some 73% of the $92bn of sukuk issued globally last year; a banner year in which issuance volume rose by 68% on 2011. Malaysia is also the domicile for 68% of the $210bn total sukuk outstanding globally as at end-2011, according to recent figures issued by the Securities Commission in Malaysia.

Nonetheless, there is some way to go and sales of foreign currency bonds issued out of Malaysia have topped only $358m so far this year, compared with a grand total of $2.1bn for the whole of last year. The signs are that the Malaysian authorities have discounted this year for foreign currency denominated ringgit and have introduced a raft of initiatives in the hope of capitalising on better global market conditions in 2013 and beyond. Ringgit sukuk however continue to outstrip issuance in foreign currency.

Khazanah, the country’s sovereign-wealth fund alone, sold $358m of seven-year bonds convertible into shares at a negative yield in March alone. However, that was pretty much a plain vanilla deal for the issuer, which is rated A3 by Moody’s. Sukuk watchers may remember that the fund issued the first yuan-denominated Shari’a compliant notes in Hong Kong last year.

Corporate sales of ringitt denom­inated sukuk in Malaysia climbed 8% in the first quarter (compared with Q1 2011) to MYR13.4bn, after Tanjung Bin Energy raised MYR3.3bn in March in the biggest offering so far this year. Investor demand is also buoyant. A recent issue by Pembinaan BLT, the state-owned construction company, worth MYR1.35bn was over­subscribed 2.6 times.

Even so, the market infrastructure remains problematic and will likely dampen growth unless Malaysia can unlock key elements. Among them must rank a lack of secondary market liquidity; in particular the lack of secondary market trading. This is a problem of infrastructure and supply as well as a lack of formal trading mechanisms. Without an active secondary market liquidity and sustained fund manager participation in the market is not really feasible.

Once the Kuala Lumpur-based International Islamic Liquidity Management Corporation (IILM) is up and running properly, the resulting intermarket dialogue should spur member states and the central bank executives that represent them in the corporation should help (over the longer term) should help to mitigate this lack of market liquidity. The IILM is supposed to facilitate cross-border liquidity management among institutions offering Islamic financial services by making available a variety of Shari’a-compliant instruments, including sukuk, on commercial terms, to suit the varying liquidity needs of these institutions. The IILM, of which the Saudi Arabian Monetary Agency (SAMA) is a founding member, is due to launch its debut benchmark sukuk within the next two months. Some $3bn of issuance is expected to originate out of the IILM each year.

For now, Malaysia is managing to retain the initiative and remains the most developed systemic Islamic financial market and an active secondary trading market. However, it is not the largest liquidity pool in Islamic finance; that honour goes to Saudi Arabia, which is potentially the largest sukuk origination market; though again, local infrastructure limitations are apparent. Very few sukuk, for instance, are traded on the Tadawul and the market remains firmly domestic.

According to the latest data of the Securities Commission Malaysia, between 2000 and 2010, the First Capital Market Masterplan period, the local Islamic capital market more than tripled in value to MYR1.05trn, growing at an annualised rate of 13.6%. The Second Capital Market Masterplan, or CMP2, which spans the ten-year period to 2020 (please refer to FTSE Global Markets, Issue 57, pages 55 to 60 for more information), expects Malaysia’s Islamic capital market to grow by an average 10.6% a year, to reach just under MYR3bn by 2020, of which sukuk segment will account for 46% of the total.

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