Cagamas provides liquidity amid Covid-19 outbreak

Latest US$102 million equivalent offering will fund mortgage loan purchases

Malaysia’s national mortgage corporation Cagamas plays its role as a liquidity provider to the financial system amid the volatile global market environment in the wake of the covid-19 outbreak with the successful conclusion of its latest fund-raising exercise, a 450 million ringgit (US$102 million) offering.

The offering, the company announced on March 20, is comprised of 300 million ringgit conventional medium-term notes (CMTNs) for two years and 150 million ringgit conventional commercial papers (CCPs) for three months. The proceeds from the respective issuances will be used to fund the purchase of mortgage loans from the financial system.

The CMTNs were priced at 3.03%, or 33bp over the Malaysian government securities, while the CCPs were priced at 5bp above the three-month Kuala Lumpur interbank offered rate (Klibor), or equivalent to 2.83% on pricing date.

“The pricing of the bonds was concluded at a time of highly volatile global financial markets arising from the plunge in oil prices and threat of the Covid-19 pandemic,” notes Cagamas president and CEO Chung Chee Leong. “There is a risk-off and cautious sentiment in the market as evidenced by the broad-based selling activities in both global equity and fixed income markets, including [those in] Malaysia.”

He adds: “In this unprecedented period, Cagamas continues to play its role as a liquidity provider to the financial system with the successful conclusion of CMTNs and CCPs via a private placement exercise.”

The papers will be redeemed at their full nominal value upon maturity. The latest issuance brought Cagamas’ total fund raising so far this year at 1.255 billion ringgit, consisting of 950 million ringgit of conventional paper and 305 million ringgit Islamic paper.

In 2019, Cagamas’ total issuance amounted to 10.2 billion ringgit, marking the third year in a row in which the company exceeded 10 billion ringgit worth of issuances. However, the amount was down 35.4% from the 15.8 billion ringgit it raised in 2018.

Date

24 Mar 2020

Channel

Capital Markets

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