Clifford Chance's Singapore office has advised Khazanah Nasional Berhad, the investment holding arm of the Government of Malaysia, and Rafflesia Capital Limited on the groundbreaking issue of US$750m of Shariah-compliant exchangeable trust certificates, known as 'sukuk'.

The deal represents a significant milestone in the increasing area of Islamic finance: it is the world's first exchangeable Islamic bond; the largest ever exchangeable or convertible issue out of Malaysia; and the largest exchangeable or convertible issue out of Asia ex-Japan this year.

"The innovative structure represented by the certificates was more than 18 months in the making. These certificates are an important step forward in the development of Shariah-compliant financial instruments," Crawford Brickley (pictured), head of Clifford Chance's Asian capital markets group, said in a statement.

The offering comprises US$750m of periodic payment trust certificates due 2011, which are exchangeable into ordinary shares of the telco Telekom Malaysia Berhad, currently held by Khazanah. 

Provisions have been made to remove any income that is not Shariah-compliant from the dividend payments made by Telekom Malaysia on the shares underlying the certificates. The certificates also provide for repurchase in the event that Telekom Malaysia ceases to satisfy certain Shariah requirements. 

UBS acted as the global coordinator for the offering and was also joint bookrunner and lead manager, together with CIMB and HSBC Amanah.