BHIC to Seek Islamic Bond to Fund Royal Malaysian Navy's Maharaja Lela-class Frigates Project
BHIC to Seek Islamic Bond to Fund Royal Malaysian Navy's Maharaja Lela-class Frigates Project

BHIC to Seek Islamic Bond to Fund Royal Malaysian Navy’s Maharaja Lela-class Frigates Project

In 2020, Malaysian government have announced that the Royal Malaysian Navy’s Maharaja Lela-class frigates or Littoral combat ships (LCS) project encountered some delays. The Malaysian Ministry of Defence (Kementerian Pertahanan Malaysia) awarded the project to BHIC in 2011 and at least two vessels should have been delivered by 2020 but none of the ships delivered yet as 2020. The Ministry of Defence is considering two options to resolve the delayed RM9 billion LCS project by Malaysia’s state-owned Boustead Heavy Engineering Corporation (BHIC).

The first option is BHIC need to continue the construction of the first of two ships so the government can resolve it. The second option is the government will ask the DCNS (the original designer) to complete the ships but this option was rejected by the parliament. Pangkor assemblyman, Datuk Seri Dr Zambry Abdul Kadir had said about 200 vendors and contractors will shut down and 10,000 workers will affected if LCS program continue to delay. On 5 May 2021, the Malaysian government decided that it would retain BHIC as the class’ shipbuilder.

Keel laying ceremony of the Royal Malaysian Navy’s Maharaja Lela-class frigate (Photo by Boustead Heavy Engineering Corporation)

Earlier this month, Janes reported that BHICis seeking to issue an Islamic bond worth up to RM4 billion ($962 million) to support its programme to construct six Maharaja Lela (Gowind)-class Littoral Combat Ships (LCS) for the Royal Malaysian Navy. BHIC CEO Sharifuddin Md. Zaini Al-Manaf told Janes that the funding would be raised through the sukuk securities system, an interest-free finance mechanism akin to conventional bonds.

The Maharaja Lela-class frigates (Littoral combat ships, LCS) is a class of six stealth frigates being built for the Royal Malaysian Navy. The ships are based on an enlarged version of the Gowind-class corvette, designed by DCNS (now Naval Group) of France. The contract has been finalised and it has been decided that all six ships will be built by local shipbuilder BHIC at a ceiling price of RM9 billion (US$2.8 billion), starting from 2015. The ships will be 111 metres (364 ft 2 in)s long with a displacement of 3,100 tonnes (3,100 long tons).