Malaysian state fund to sell 5 bln ringgit bonds

UPDATE 1-Malaysian state fund to sell 5 bln ringgit bonds

KUALA LUMPUR, May 18 (Reuters) - The Terengganu Investment Authority, the investment arm of a Malaysian state, is to sell 5 billion ringgit ($1.40 billion) of bonds guaranteed by the federal government this week, it said in a statement on Monday.

The fund has been set up and labelled as Malaysia's first sovereign wealth fund and is modelled on similar concepts in the Gulf with the aim of investing oil revenues for the long term.

The fund said it would invest in tourism, energy and agriculture in the state, which is one of Malaysia's poorest, and would team up with sovereign wealth funds to invest.

"This week will see the sovereign wealth fund raising 5 billion ringgit from the capital markets on the back of a government guarantee," the authority said in a statement.

The fund said that investors would be "sourced from domestic and foreign capital markets" although it did not give any details on the state's oil revenues which will be used to securitise the bond.

Goldman Sachs has been advising the fund on capital raising.

The federal government and the state had been at loggerheads over the oil revenues, paid by Malaysia's Petronas, when the opposition took the control of the poor northeastern state in elections in 1999.

The federal government only started repaying money directly to the state in 2004 after it passed back into the hands of the National Front coalition that has ruled Malaysia for 51 years.

There is no firm data on the amount of money the state receives each year, although the state assembly was told last year that 7.364 billion ringgit was channeled to the state from the federal government in the three years to March 2007.

No one from the investment authority was immediately available for comment on the oil royalty revenues.

$1=3.566 Malaysian Ringgit)

Reporting by Razak Ahmad; Writing by David Chance; Editing by Liau Y-Sing)

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