Malaysia markets dollar sukuk despite 1MDB noise

HONG KONG - Malaysia is marketing a dual-tranche US dollar sukuk even as state fund 1 Malaysia Development continues to attract headlines.

The 10 and 30-year 144A/Reg S notes are being marketed at around 150bp and 165bp over US Treasuries.

Investor sources told IFR the transaction is expected to amount to $1.25-$1.50 billion.

The notes are expected to be rated on par with the sovereign at A3/A-/A-.

The last sovereign sukuk from Asia was Indonesia's US$2.5bn offering last month at tenors of five and 10 years, on which Middle East accounts were the largest investors.

CIMB, HSBC, JP Morgan and Maybank are joint bookrunners for the planned Malaysia deal. Investor meetings were held in Asia last week and ended on Monday.

Bonds of embattled 1MDB tumbled on Monday after Abu Dhabi's International Petroleum Investment Corporation said it would no longer service interest payments on $3.5 billion of the fund's debt.

IPIC said in a filing that 1MDB had failed to make a $1.1 billion payment and that, as a result, its obligations to make interest payments on two 1MDB bonds totalling $3.5 billion in principal had ended.

The disputed bonds do not carry a guarantee from the Malaysian sovereign.