Malaysia's international airport operator plans to sell the country's second sukuk without a set maturity, after a single buyer snapped up the debut issue.

Malaysia Airports Holdings Bhd is considering offering RM1 billion of perpetual notes or may sell Islamic securities that give senior claims to holders, chief financial officer Faizal Mansor said in an August 15 interview. Malaysian Airline System Bhd priced the first issue at 6.9 per cent in June 2012, with the second-biggest pension fund purchasing all the RM1 billion on sale.

The manager of Kuala Lumpur's international airport, which handled 67 million passengers in 2012, is financing a budget terminal that's two years behind schedule as more ambitious plans push up costs. Bank Muamalat Malaysia Bhd said the company may be able to sell debt at lower yields because it's turned a profit in the past decade, while the national airline is posting losses.

"There will be demand for the perpetual bonds at the right yield to compensate for rising rates as a result of the Federal Reserve's tapering," Norlia Mat Yusof, chief investment officer at Etiqa Insurance and Takaful in Kuala Lumpur, said in an e-mail interview yesterday. "It's probable that pension funds and asset-management companies will be interested."

RAM Rating Services Bhd gave the perpetual bonds a preliminary AA2 rating, the third-highest investment grade, while the senior notes are ranked AAA. Malaysian Airlines debt isn't rated and so cannot be traded under Malaysia's Securities Commission rules, said Fariza Taib, a fixed-income manager at Kuala Lumpur-based Asian Islamic Investment Management Sdn Bhd. Both companies are part owned by sovereign wealth fund Khazanah Nasional Bhd.

Borrowing costs on AA2 corporate bonds that don't comply with Islamic tenets dropped 37 basis points, or 0.37 percentage point, to 4.84 per cent since Malaysia Airlines sold its perpetual notes in June last year. The indicative yield for MAHB would be 4.5 per cent to 4.55 per cent, Etiqa's Norlia said.

The company sold RM600 million of sukuk due 2024 in December at a coupon rate of 4.15 per cent. The securities last yielded 4.2 per cent, prices from Bursa Malaysia show.

"Investors may demand a higher premium for the perpetual sukuk given the headlines associated with the budget terminal delay," Fariza, who oversees RM1 billion, said in an interview yesterday. "If the yields are attractive, demand will be decent as the debt is rated.

Kumpulan Wang Persaraan (Diperbadankan), the pension fund that bought Malaysian Airlines' notes, will decide on whether to participate in the bidding process of Malaysian Airports' perpetual sukuk when there are more details, chief executive officer Wan Kamaruzaman Wan Ahmad said in an August 16 e-mail.

Perpetual bonds are treated as equity rather than debt on a company's balance sheet and tend to have a callable option. OSK- UOB Islamic Fund Management Bhd in Kuala Lumpur isn't keen on buying the airport securities given they aren't actively traded and there's no set maturity, chief executive officer Mohd Noor A Rahman said in an interview yesterday.

Average yields on global Islamic bonds, which pay returns on assets to comply with the Koran's ban on interest, climbed 14 basis points this month to 3.92 per cent, according to the HSBC/Nasdaq Dubai US Dollar Sukuk Index. The difference between that average and the London interbank offered rate widened two basis points in August to 188 basis points.

Islamic debt sold internationally posted a 1.3 per cent loss this year, the HSBC gauge shows, while emerging-market bonds dropped nine per cent, according to JPMorgan Chase and Co's EMBI Global Index.

The Bloomberg-AIBIM Bursa Malaysia Corporate Sukuk Index, a benchmark that tracks the most-traded local-currency notes, gained 1.2 per cent this year to 103.479.

Malaysia Airports' sukuk would be part of a RM2.5 billion Islamic bond programme, according to an August 16 statement from RAM Ratings. The company's perpetual notes are ranked two levels lower than its corporate rating to reflect the risks of deferred profit distribution and subordinated rights of holders to claims in the event of insolvency, RAM said.

AirAsia Bhd, the nation's biggest low-cost carrier owned by millionaire Tan Sri Tony Fernandes, has complained about the delay in building the terminal that's slated to handle 30 million passengers a year.

The initial cost was estimated at RM3.1 billion and has increased to RM4 billion given the additional work, Faizal Mansor, chief financial officer of Malaysia Airports, said in an August 15 interview from Sepang, about an hour's drive from Kuala Lumpur.

MAHB, which is the sole operator of all 39 government-owned airports in Malaysia, has a market capitalization of RM8.4 billion, according to data compiled by Bloomberg. The company's debt totaled RM3.1 billion and equity RM4.3 billion as of December 31, 2012. The company may report a net profit of RM434 million this year, according to the average estimate of 16 analysts in Bloomberg survey, after posting net earnings in 2012 of RM419 million.

"MAHB is a name investors are comfortable with but given current market conditions, yields will be a key factor," Azdini Nor Azman, the Kuala Lumpur-based head of fixed income at Bank Muamalat Malaysia, said in interview yesterday.-- Bloomberg