Khazanah Nasional Bhd., Malaysia’s state investment company, plans to sell $1.5 billion of five- and 10-year Islamic bonds, according to a person familiar with the matter.

The $600 million of five-year Islamic notes may price to yield 90 to 100 basis points more than the Singapore swap offer rate, while the spread on the $900 million of 10-year bonds may be 120 to 130 basis points, the person said, asking not to be identified as details are private.

 

The transaction would be the biggest Singapore dollar- denominated sale of Islamic bonds, according to data compiled by Bloomberg. City Developments, the island nation’s second- biggest homebuilder, was the last company to sell sukuk denominated in Singapore dollars when it issued $50 million of four-year, 3.565% Islamic notes in December.

 

Singapore is seeking to develop its Islamic finance market as global sales of bonds that comply with Shariah law grew 43% to US$20.2 billion ($27.2 billion) last year, Bloomberg data show. Islamic bonds use asset returns to pay investors in compliance with Islam’s ban on interest.

 

“Greater depth and liquidity will in turn draw even more participants into using Islamic finance for their funding and investment needs,” the Monetary Authority of Singapore said in a statement on July 27.

 

CIMB Investment Bank Bhd., DBS Bank and Oversea- Chinese Banking Corp. are arranging the sale for Khazanah, another person familiar with the matter said on July 28. Khazanah spokesman Mohd Asuki Abas declined to comment on the planned sale ahead of a public announcement.

 

The Kuala Lumpur-based company said July 26 it offered $3.5 billion for the shares in Singapore’s Parkway Holdings that it doesn’t already own, topping a bid from India’s Fortis Healthcare.