ALI eyes Islamic bond sale to fund venture in Malaysia

Property giant Ayala Land Inc. is looking at debuting at the Islamic financing market, by issuing “sukuk” securities, to boost its fledgling venture into Malaysia’s property industry.

At a forum organized by The Asset magazine, ALI chief finance officer Jaime Ysmael said the company, which recently bought into Malaysian real estate company MCT Bhd. as part of its Southeast Asian expansion program, was looking at sukuk as a fund-raising alternative.

Sukuk refers to a financing method that conforms to Islamic laws, which, among others, prohibits the charging of interests.  Instead of selling IOUs, the borrower sells debt paper that are backed by tangible assets compliant with Shariah laws. Compared with traditional bonds that earn fixed interest, sukuk increases in value when underlying assets appreciate

“It’s really more to match the currency investment,” Ysmael told reporters on the sidelines of the forum. “We’re exploring possible options but we already funded our existing investment.”

ALI, through Regent Wise Investments Ltd., in April acquired 9.16 percent of Malaysian company GW Plastics Holdings Bhd. through a private placement amounting to $43 million or P1.9 billion. The Malaysian firm was later renamed MCT Bhd.

ALI subsequently entered into a call option agreement with the two founders of the Malaysian firm, Barry Goh Ming Choon and Tong Seech Wi, allowing it to increase its shares in MCT up to a maximum of 32.95 percent.

To fund the entire investment, which needs to be accomplished in a month’s time, Ysmael said ALI is looking at the cheapest options available.

“We’re talking to other banks to see if we can match it with (Malaysian) ringgit-denominated loan, whether [via] sukuk or bilateral loan,” Ysmael said.

First established in 1999 as a construction company, MCT is a property development company specializing in mixed-use projects that include retail, office, hotel, and mid- to affordable residential developments in Malaysia.