Biggest Malaysia State Fund Weighs Debut Exchangeable Bond Sale

(Bloomberg) -- Malaysia’s biggest state-owned fund manager, which owns more than 10 percent of the local stock market, is considering its first sale of exchangeable bonds as it seeks to raise funds for overseas investments.

Permodalan Nasional Bhd. is exploring all options including an offering of exchangeable bonds, or notes backed by shares in a listed company, a representative said Thursday in response to Bloomberg queries. PNB recently asked investment banks to submit proposals for the potential deal, people with knowledge of the matter said.

The asset manager hasn’t made a final decision about what the underlying stock would be, according to the people, who asked not to be identified because the information is private. It holds a 48 percent stake in Malayan Banking Bhd., the country’s biggest lender, valued at more than $12 billion based on Thursday’s close, data compiled by Bloomberg show.

PNB also owned about 18 percent of Axiata Group Bhd., the $9.4 billion wireless carrier, at the end of 2017. Other major holdings include stakes in Sapura Energy Bhd., Sime Darby Bhd. and Tenaga Nasional Bhd., according to its website.

The fund is seeking capital in foreign currencies so it can boost its overseas investments, one of the people with knowledge of the matter said. PNB is following in the footsteps of Malaysian sovereign wealth fund Khazanah Nasional Bhd., which usually hits the market once a year with a sale of U.S. dollar exchangeable bonds backed by some of its stock-market holdings.

If PNB decides to proceed, it would likely issue sukuk as it prefers financing methods complying with Islamic principles, according to one person. It could still opt for another form of fundraising, the people said.

PNB managed 279 billion ringgit ($69 billion) of assets at the end of 2017, with around 70 percent invested in equities. It plans to diversify its global assets to ensure sustainable returns as part of its five-year strategy, according to the fund’s website.

PNB recently joined hands with Malaysia’s biggest pension fund to buy the commercial property assets at the Battersea Power Station project, where Apple Inc. plans to have its U.K. headquarters.

To contact the reporters on this story: Crystal Tse in Hong Kong at ctse44@bloomberg.net;Elffie Chew in Kuala Lumpur at echew16@bloomberg.net

To contact the editors responsible for this story: Fion Li at fli59@bloomberg.net, Ben Scent

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