soalan 1 assignment - Corporate Bond rating and the effect...

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Corporate Bond rating and the effect on financing costs This paper discuss a change in a corporate bond rating and the effect on financing costs from the year 2007 untill the year 2009. The specific firms for this research is Malayan Banking Berhad (Maybank) . There are several economic and financial benefits of active domestic currency sovereign and corporate bond markets. Bond markets significant contribution is in diversifying the source of finance and reducing the reliance on the domestic banks which has been the case in many East Asian countries. In this way, bond markets stimulate opportunities for risk pooling and risk sharing for both borrowers and lenders. Most importantly, for Asian economies, bond markets can be important means for reducing an economy's vulnerability to maturity risk, exchange rate risk, and "sudden reversal" of global private capital flows. Furthermore, it is plausible that bond markets can indirectly improve corporate governance by developing a "credit culture" (Das, 2005). On 11 April 2007, the Bank issued RM1.5 billion nominal value Subordinated Bonds payable semi-annually in arrears in April and October each year, subject to the revision of interest explained below and are due in 2017. On 25 April 2007, MBB Sukuk, the Issuer, (a Special Purpose Vehicle (“SPV”) formed solely for the purpose of participating in this transaction and issuing the subordinated certificates) issued USD300 million Subordinated Certificates with a distribution rate based on 6 months LIBOR plus a margin of 0.33% per annum payable semi- annually in arrears in April and October each year. The proceeds from the Subordinated Certificates are paid to Premier Sukuk, another SPV incorporated for this transaction, and ultimately paid to the Bank. In return, the Bank transfers the beneficial ownership of a portfolio of assets (comprising hire purchase contracts and cash) by way of an equitable assignment to Premier Sukuk and subsequently to the Issuer. The portfolio assets are managed by the Bank pursuant to a Management Agreement. The Subordinated Certificates are due in 2017. The Issuer may, subject to the prior consent of Bank Negara Malaysia, redeem the Certificates, in whole but not in part, on the 5th anniversary of the issue date or at any semi-annual distribution payment date thereafter. Page | 1
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Corporate Bond rating and the effect on financing costs The Certificate holders are entitled to a step-up margin of 1.33% per annum from the beginning of the 6th year to the final maturity date. The Certificate holders will have recourse on a subordinated basis to the Bank pursuant to the Sale and
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This note was uploaded on 02/06/2011 for the course BUS 663 taught by Professor Hjmahyudin during the Spring '11 term at International Islamic University Malaysia.

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soalan 1 assignment - Corporate Bond rating and the effect...

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