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23 July 2010

Danajamin, First Financial Guarantee Insurer to Provide Islamic Guarantee for Sukuk

Danajamin became the first Financial Guarantee Insurer to provide an Islamic Guarantee (or Al-Kafalah) for sukuk , with the issuance of the first Danajamin guaranteed Sukuk Programme.

First Danajamin Guaranteed Islamic Securities Issued

KUALA LUMPUR – Danajamin Nasional Berhad (“Danajamin”) today became the first Financial Guarantee Insurer to provide an Islamic Guarantee (or Al-Kafalah) for sukuk , with the issuance of the first Danajamin guaranteed Sukuk Programme. The RM75 million sukuk which was issued by LBS Bina Group Berhad (“LBS Bina”), comprises two tranches. The first tranche is a RM35 million four (4) year sukuk while the second is a RM40 million five (5) year sukuk.

Ahmad Zulqarnain Onn, Chief Executive Officer of Danajamin said, “We are very pleased to be the first Financial Guarantee Insurer to provide an Al-Kafalah guarantee for a sukuk programme. This achievement will further reinforce Malaysia’s position as an Islamic Financing hub and we are proud to be able to contribute towards the development of this key industry.”

LBS Bina, the issuer of the sukuk, is a property development company listed on the Main Market of Bursa Malaysia. The RM75 million issuance is part of a RM135 million seven-year Islamic Commercial Paper/Islamic Medium Term Note Programme. The funds raised from the sukuk issuance will be used primarily for financing the construction of several residential property development projects which are located in Puchong, Cameron Highlands and Batu Pahat respectively.

This is the second private debt securities guaranteed by Danajamin that have been issued to-date. The sukuk, issued at AAA (fg) rating, was fully subscribed.

“The positive reception towards LBS Bina’s sukuk further reinforces investors’ confidence towards Danajamin’s guarantee. Our guarantee structure enables companies from a wide range of sectors to raise long-term fixed rate financing from the bond/sukuk market.”

All applications for Danajamin’s guarantee are evaluated according to Danajamin’s Underwriting Principles, namely:

  • project viability,
  • clear purpose of funds utilization,
  • adequate control of fund disbursements,
  • adequate ringfencing of cashflow for repayment,
  • sufficient security arrangements and
  • application of appropriate covenants.

Danajamin, the country’s Financial Guarantee Insurer was established as part of the government’s efforts to ensure that corporations will continue to have access to funding to finance their businesses. Specifically, Danajamin provides financial guarantee, a credit enhancement, to bond/sukuk issuances to help companies raise long-term fixed rate financing from the bond/sukuk market at reasonable rates. The bond/sukuk market is an important alternative source of financing, as it complements the banking sector. Its continuous development is critical in ensuring that Malaysian companies have several funding sources to finance their business expansion and investments.

About Danajamin

Danajamin Nasional Berhad is Malaysia’s first Financial Guarantee Insurer.A AAA-rated company, Danajamin providesfinancial guarantee insurance to bonds and sukuk issuances to facilitate capital-raising by Malaysian companies from the debt capital markets. The establishment of Danajamin forms part of the Government’s on-going effort to ensure the continued flow of credit in the financial system to businesses. Danajamin is wholly owned by the Malaysian Government and has an issued and paid-up capital of RM1 billion with a capacity to underwrite policies of up to RM15 billion. It is licensed under the Insurance Act 1996, and is regulated and supervised by Bank Negara Malaysia.

Visit www.danajamin.com for more information.

Media Contact

Ann Lim
Head, Communications
Danajamin Nasional Berhad
Tel (03) 2299 2068, (019) 2882 736
Email: ann@danajamin.com

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