OSK seeks Danajamin guarantee for RM250m bonds

Written by Isabelle Francis
Monday, 16 November 2009 11:17

KUALA LUMPUR: OSK Investment Bank Bhd has sought Danajamin Nasional Bhd’s assistance to guarantee two separate bond issuances worth RM250 million, said OSK Investment Bank officials.

OSK Investment Bank head of debt capital markets and director Eddie Fong told The Edge Financial Daily that it had submitted the two applications to Danajamin recently.

“There are potentially more (bond issuances) in the pipeline,” he said in a recent interview. Also present at the interview was OSK debt capital markets associate director Michael Ng.

Fong said one issuance was to be made by a public-listed company and the other by a private company. OSK is the adviser and arranger of these issuances .

Danajamin, the country’s first financial guarantee institution, has a current capital base of RM1 billion and the ability to guarantee bonds of up to RM15 billion over the next 24 months.

The institution has been given the mandate to guarantee bond issuances that are strictly meant for new investments with “multiplier effects” on the economy, in line with the country’s stimulus package plans.

Danajamin’s role is to provide financial guarantee to issues of private debt and Islamic securities. It operates as a guarantor, while charging premiums for guaranteeing bonds issued by companies.

On the outlook of the debt capital market, Fong said although domestic fund raising was recovering, investors were still picky on their investments.

As a result, these cautious investors would subscribe only to highly-rated bonds, which are namely AA and AAA-rated papers.

On a separate matter, Fong said OSK Investment Bank had successfully advised and arranged US$10 million (RM33.7 million) worth of redeemable convertible bond (RCB) for PERISAI PETROLEUM TEKNOLOGI [] Bhd.

Describing the RCB as a “major breakthrough”, Fong said the investment bank was game to introduce the product to other companies here.

In order to do this, Fong said the local market had to be educated on features and benefits of using RCB to raise funds.

He said the local investment community, which currently has a low acceptance level of RCBs, could be divided into two categories: the fixed income and equity investors.

“Convertible bonds can appeal to both categories of investors,” added Fong.

He also noted that the Perisai RCB was the first US dollar-denominated bonds issued and cleared in Malaysia.

A convertible bond is a paper issued by a company that gives an option to the holder to convert the bonds into specific number of shares, based on a specific conversion price within a stipulated timeframe.

Perisai, as an issuer, benefits from such innovative hybrid security, as it does not need to commit to periodic interest payments that can disrupt cash flow. Fong said OSK Investment Bank was also in talks to help foreign clients raise funds via sukuk issuances here.