Malaysia Airlines Group has provided more information on its recent M$1 billion ($314 million) Sukuk issuance.
The junior Sukuk, which is not rated, was issued under the Islamic principle of Musharakah, while the principle of Commodity Musawamah will be employed to effect the deferral of the periodic distributions, if any.
The periodic distribution up to year 10 is 6.9% per annum. If MAS does not exercise its option to redeem at the end of the 10th year, the periodic distribution increases by 2.5%.
Deferred periodic distribution, if any, will be cumulative but will not earn additional profits (i.e. there will be no compounding).
MAS also has the option to redeem the junior Sukuk if there is a change in accounting standards resulting in the junior Sukuk no longer being recognised as equity capital.
Payment obligations on the junior Sukuk will at all times, rank ahead of other share capital instruments for the time being outstanding, but junior to the claims of present and future creditor of MAS (other than obligations ranking pari passu with the Junior Sukuk).
In May the board of directors of MAS received approval from the securities commission for the establishment of the M$2.5 billion perpetual junior sukuk programme. The first tranche was subscribed by Kumpulan Wang Persaraan (Diperbadankan).
The proceeds raised from this issuance will be utilised for MAS' working capital requirements and refinancing of existing borrowings.