KUALA LUMPUR, June 18 Societe Generale (SocGen) has concluded the marketing roadshow for its 1 billion ringgit ($311 million) sale of Islamic bonds in Malaysia and will decide on the size of its first issuance within days.
France's third-largest bank by assets plans to sell sukuk with maturities ranging up to 15 years, and has already received approval from Malaysia's central bank and securities regulator.
SocGen is the second conventional bank to announce a Malaysian sukuk sale this month after Japan's Bank of Tokyo-Mitusbishi UFJ, and adds to a rising number of foreign firms entering a market typically reliant on domestic issuers.
An accommodative tax regime and strong local demand have made Malaysia's Islamic capital market attractive for international issuers, and big names such as SocGen could encourage even more entrants, analysts said.
"We are also looking at growing our business in Southeast Asia. We looked and realized that there was quite a large pool of Islamic funds," Jacqueline Tan, SocGen head of global market sales, said at a media briefing on Wednesday.
The French bank is targeting Malaysian investors seeking ringgit-denominated bonds sold by foreign institutions.
"Had we issued a (U.S.) dollar sukuk in Malaysia it wouldn't be meaningful because foreign investors could get SocGen dollar sukuk outside of Malaysia," said Tan.
At $311 million, the sale is a fraction of the 20 billion to 22 billion euros ($27 billion to $30 billion) worth of debt SocGen plans to sell in 2014. So far this year, the bank has sold bonds totalling 10.6 billion euros.
Malaysia's government is working to internationalise its Islamic capital market by attracting foreign firms, while SocGen is aiming to diversify its investor base by selling sukuk.
"(The sale is) not huge but we are always keen to tap into a new group," said Philippe Dufay, SocGen director of solutions for global markets.
Dufay said the bank invested a considerable amount of time preparing for the sale.
"That was a challenge because it was a long process and it took us one year to complete. We had to make sure we built a program matching the regulation, and matching the expectation of the investor in terms of currency, structure and rating."
There were also cost premiums to enter a market as a first-time issuer.
"What we hope is that if we see appetite to renew or increase the size (of the sale), we will not have to incur the same level of cost," said Pascal Lambert, SocGen head of Southeast Asia.
SocGen hopes its experience selling sukuk in Malaysia will enable it to evolve into an advisor in the field.
"We can share our experience and in the future advise clients who want to diversify their financing sources to issue sukuk in Malaysia," said Tan.
SocGen plans to sell the sukuk through a wholly owned subsidiary, and a structure featuring contracts that would provide investors legal recourse to the French lender.
Hong Leong Bank Bhd subsidiary Hong Leong Islamic Bank Bhd is advising the sale. ($1 = 3.2170 Malaysian Ringgit) ($1 = 0.7345 Euro) (Reporting by Al-Zaquan Amer Hamzah and Hawa Semasaba; Editing by Christopher Cushing)