13 June 2012
PAS has demanded an explanation from the government over the move to allow pensions fund, Retirement Fund (Incorporated), or KWAP, to subscribe some RM1.5 billion worth of Malaysian Airlines’ perpetual bonds, or what are known as junior sukuk.
Its Research Centre director Dr Dzulkefly Ahmad questioned how such a risky investment by KWAP could be allowed to take place using pension funds belonging to the public.
“This bond has no rating, no guarantee, no tenure and is high risk. We want an explanation from the government why KWAP is subscribing. Is this forced down their throat?” he said.
MAS’s junior sukuk programme arranged by Maybank Investment Bank Bhd is aimed to raise some RM2.5 billion to fund the airlines’ turnaround, following its biggest losses last year at RM2.52 billion, as part of the company’s plan to raise RM9 billion to finance its operation.
The programme, split to two phases, will see the the first phase of RM1 billion entirely taken up by KWAP.
It is understood that the perpetual bonds received no guarantee from the government, and pay a rate of 6.9 per cent while not rated.
The bonds, Dzulkefly (pic) pointed out, would be treated as equity under Malaysian accounting conventions to raise the capital of the financially troubled MAS.
“This perpetual bond is rarely issued in the country,” said Dzulkefly, adding that despite the 6.9 percent interest, the sukuk are still considered very high risk investment in the absence of maturity date, as well as the prospect of losses if MAS was faced with another ‘liquidation’.
Dzulkefly stressed that the BN government must come clean on the sukuk investment by making public its terms and conditions.
Please also read: ‘Disclose details on MAS bonds purchase (FMT).